Big Changes to Canada Pensions in 2025: More Money for Retirees

Big Changes to Canada Pensions in 2025: In 2025, Canada is making some important updates to two pension programs: the Canada Pension Plan (CPP) and Old Age Security (OAS). These changes will give retirees more money each month to help with rising costs like food and rent. This article explains what’s changing, how it affects you, and some easy tips to get the most out of these benefits.

What’s Changing in 2025?

Here’s a quick look at the updates for the two main pension programs:

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• Canada Pension Plan (CPP): This pension will go up by 33% over time. It’s for people who worked and paid into the CPP during their careers.
• Old Age Security (OAS): People 75 and older will get 10% more money each month. This is for Canadians 65 and older who’ve lived in Canada for a while.
• Clawback Rules for OAS: If you make a lot of money, some of your OAS might get taken back. But the income limit for this will go up to $90,997 in 2025.

These changes are happening because things cost more now, and more Canadians are retiring. The government wants to make sure retirees have enough to live on.

What’s the Canada Pension Plan (CPP) and What’s Changing?

The CPP is money you get every month if you worked in Canada and paid into the plan while working. Both you and your employer paid a small part of your wages into it. If you were self-employed, you paid both parts.

Here’s what’s new for CPP in 2025:

• More Money Over Time: By 2025, the CPP will give you 33% of the money you earned before retiring, instead of just 25%. This increase started a few years ago and will be complete by 2025.
• Higher Earnings Limit: The most money you can earn and still pay into CPP will go up to $79,400. This means people who make more can get bigger pensions later.
• Contribution Rate: You and your employer will each pay 5.95% of your earnings into CPP. If you’re self-employed, you pay 11.9%.
• Maximum Payment: If you paid into CPP a lot, you could get up to $1,306.57 per month in 2025.

What’s Old Age Security (OAS) and What’s Changing?

OAS is money for people 65 and older who’ve lived in Canada for at least 10 years. You don’t have to work to get it—it comes from taxes the government collects.

Here’s what’s new for OAS in 2025:

• Extra for Seniors 75+: If you’re 75 or older, your OAS payment will go up by 10%.
• Maximum Payments:
  • If you’re 65 to 74, you could get up to $727.67 per month.
  • If you’re 75 or older, you could get up to $800.44 per month.
• Adjustments for Rising Costs: OAS payments go up a little every few months to match higher prices.
• Clawback Limit: If you make more than $90,997 in a year, some of your OAS gets taken back. If you make $148,605 or more, you might not get any OAS.

How Will This Help You?

The extra money from CPP and OAS will help retirees pay their bills and keep up with higher costs. Here’s what you might get each month in 2025, depending on your age:

• Ages 65 to 74: Up to $1,306.57 (CPP) + $727.67 (OAS) = $2,034.24 total per month.
• Ages 75 and Up: Up to $1,306.57 (CPP) + $800.44 (OAS) = $2,107.01 total per month.

Your exact amount depends on how much you paid into CPP and how long you’ve lived in Canada.

Examples of How It Works

Here are some examples to show how these changes might look for different people:

• Example 1: A 68-Year-Old Retiree: Linda worked for years and paid a lot into CPP. She gets $2,034.24 each month ($1,306.57 from CPP and $727.67 from OAS). She doesn’t make a lot of extra money, so she keeps all her OAS.
• Example 2: A Wealthy 75-Year-Old: David is 75 and makes $120,000 a year from investments. Because his income is over $90,997, some of his OAS gets taken back, so he gets less than the maximum.
• Example 3: A Self-Employed Person: Sam is 60 and works for himself. He’s thinking about waiting until he’s 70 to take his CPP. If he waits, he’ll get 42% more money each month when he starts.

Tips to Get the Most Out of Your Pension

Even with these increases, you can do a few things to make sure you get as much money as possible when you retire:

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1. Start Paying Into CPP Early: The more years you pay into CPP, the more you’ll get when you retire. So start as soon as you can.
2. Wait to Take CPP: You can start CPP at 60, but if you wait until 70, you’ll get 42% more money each month. If you don’t need the money right away, waiting could be smart.
3. Avoid Losing OAS: If you make a lot of money, you might lose some OAS because of the clawback. To avoid this:
   • Take money from a Tax-Free Savings Account (TFSA) instead of a Registered Retirement Savings Plan (RRSP), since TFSA money doesn’t count toward the clawback.
   • Split income with your spouse to lower your taxable income.
4. Save Extra for Rising Costs: Even though pensions go up with inflation, it’s good to have your own savings or investments to help with extra expenses.

Why These Changes Are Important

These updates to CPP and OAS will give retirees more money to cover their costs, especially for people 75 and older who might have bigger expenses like medicine or care. It also makes sure the pension system stays strong for younger people who will retire in the future.

Want to Know More?

If you’re not sure how much you’ll get or want help planning for retirement, check out the Government of Canada’s pension website. You can also talk to a financial advisor who can help you figure out the best way to use these benefits.

The 2025 changes to CPP and OAS are good news for retirees. With a little planning, you can make the most of this extra money and enjoy your retirement without worrying too much about bills!