Don't Be Surprised by Survivor Benefits from OAS and CPP

The Old Age Security (OAS) pension and the Canada Pension Plan (CPP) are monthly payments you can only get if you are 65 or older. CPP and OAS make up a significant portion of the retirement income for many people. Any reduction due to CPP survivor benefits or OAS survivor benefits in CPP and OAS can be stressful. This reduction will only happen due to the sudden death of a partner.

There are still so many people who don't know about OAS and CPP benefits being reduced by 40% to 100% from lower and moderate-income households to higher-income households. Government pensions like CPP and OAS help higher-income households make 25%–30% of their retirement income, and lower-income households make 50%–75% of their retirement income. Losing some of these benefits can cause significant changes in retirement plans.

The sudden death of a partner is unpleasant. Many people don't think about it, but it puts important consideration into retirement plans. It is essential to understand what changes can occur in this situation. Large amounts of investment assets have lower risk in some plans.

What are the CPP Survivor Benefits When a Partner Dies?

CPP has a very complex formula for the reduction of income when a partner passes away. In this situation, the CPP survivor pension is combined with the widower's CPP pension. But now the question arises, how much money do the widowers get?

These CPP rules can often be surprising. In the best situation, the deceased's CPP benefit can be reduced by up to 40%. In the worst condition, it will be reduced by up to 100%, meaning that nothing will be left behind. It is essential to know if the worst happens, what the survivor will face in each of these situations. Many factors that affect survivor benefits are discussed here. 

If the surviving spouse is not receiving CPP benefits, then the survivor over 65 will get 60% of the contributor's retirement pension. If the surviving spouse is under 65, they will receive 37.5%. 

Here are a few examples where both partners are above 65:

Partners have max CPP: In this scenario, the survivor benefit will be reduced by 100%.

Partners have high CPP: A high CPP amount means the survivor benefit will be reduced by up to 66%.

Partners Receiving an Average CPP: Both the partners are below the maximum combined CPP payment, and the survivor benefits less by 40%. 

Commencement of CPP Benefits

In many situations, it is essential to delay CPP at the age of 70. This can become a source of high income for the rest of your life. Delaying can be helpful during inflation rate risk and investment risk. Can a delay in CPP at age 70 provide more survival profit in the future? Or in the same way, is CPP at age 60 a lower benefit?

But unfortunately, the CPP survivor benefit is a calculated-based amount received at age 65. There will be no impact on the survivor benefit that the widower will receive even if the deceased delayed CPP to age 70 or started CPP at age 60. 

Creating a Survivor Scenario: Helpful for Your Retirement Plan

Creating a Survivor Scenario is helpful for your retirement plan to understand the impact of a partner's passing. If you want to understand the financial implications of these scenarios, then seeking help from a financial planner may be the best option.

There are many other impacts and reductions in OAS and CPP that need attention.

Do you have any questions or want to get started on retirement income planning?Contact us today.

Most of the time, it becomes harrowing after the death of wives or husbands. Family members encourage the spouse to fill out the form to get the Canada Pension Plan survivor's benefit. This always astounds widowers, how little survivors expect to live on what they haven't planned for.

Here are some questions and answers:

1-Surviving Spouse is Under 65? 

A surviving spouse at age 65 will get 37.5% of the partner pension and a flat rate that rises every year.

2-Death of partner before applying for CPP?

The deceased spouse's benefit depends upon what they have contributed to their working life from age 25 to 65. CPP benefits depend upon that number. Survivors will be 37.5% under age 65; they will be 60% at age 65 or above. 

3-What if the survivor has children under 18?

There is a monthly portion per child if the family has children under 18.

Currently, the government is paying $250.27 a month per child.

Children whose ages range from 18 to 24 can also get support if they are enrolled in a post-secondary school.

4-What if a couple lives overseas?

Canada Pension Plan benefits are available in any country. Money will go to qualified pensioners if they even live outside. The same condition applies to Old Age Security.

  • They must spend 20 years as Canadian residents.
  • Their age must be 65.
  • When they leave, they must be a citizen of Canada.

5-Is the couple separated?

Suppose the deceased spouse was living in common-law with any other person. The surviving spouse could get a share of the benefits. If they are still legally married, but if the deceased spouse were living with someone else, the common-law partner would get the benefits.

6-What Happens To OAS When A Partner Dies?

The impact on OAS for the survivor is more severe, unfortunately. When a partner passes away, the deceased's OAS benefits are lost entirely. There is no survivor benefit for OAS.

Written By:
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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