Big changes are coming to Canada’s retirement income programs in 2025. Both the Canada Pension Plan (CPP) and Old Age Security (OAS) are getting important increases to help seniors cope with rising living costs and inflation. Whether you’re already retired or planning ahead, it’s important to know how these updates will impact your future income and financial security.
Here’s everything you need to know about the pension changes, who qualifies, and how to make the most of these updates.
Overview
| Pension Program | Increase in 2025 | Key Details | Eligibility |
|---|---|---|---|
| Canada Pension Plan (CPP) | Gradual benefit increase by 33% | Maximum pensionable earnings rise to $79,400. CPP will cover up to one-third of avg. earnings. | Canadians who contributed to CPP during their working years |
| Old Age Security (OAS) | 10% boost for seniors aged 75+ | Automatic increase for eligible recipients; income thresholds affect payment levels. | Canadian citizens/legal residents aged 65+ |
| General Benefits | Inflation-linked indexing continues | Payments will be adjusted regularly to match rising costs of living. | CPP for workers; OAS for seniors with residency |
| Clawback | Threshold set at $90,997; full at $148,605 | Higher earners will see their OAS reduced or fully clawed back through income tax. | Applies only to high-income seniors |
Why the Pension Boosts Matter
As inflation and daily expenses rise, pensioners need more financial support to maintain their standard of living. These increases aim to offer better stability to older Canadians, especially those relying on fixed incomes. With both CPP and OAS getting adjustments, more seniors will be able to meet basic needs, such as housing, food, and healthcare.
What Is the Canada Pension Plan (CPP)?
CPP is a mandatory public pension that you pay into during your working years. Once you reach retirement age, you receive monthly payments based on your contributions and average earnings.
Key CPP Updates for 2025
- Contribution Rate: Employees and employers each contribute 5.95% of earnings; self-employed individuals pay 11.9%.
- Maximum Pensionable Earnings: Will increase by 14% to $79,400.
- Benefit Coverage: The payout will now cover up to 33% of your average pre-retirement income, up from the previous 25%.
- Maximum Monthly CPP Payment: $1,306.57 in 2025 for those who made full contributions.
How CPP Benefits You
If you’ve been paying into CPP for most of your career, you’ll see a noticeable increase in monthly payments. The more you’ve earned and contributed, the higher your payout. CPP is also indexed to inflation, which means the amount rises with the cost of living to protect your purchasing power.
What Is Old Age Security (OAS)?
OAS is different from CPP. It’s a government pension available to most Canadians over the age of 65, whether or not they’ve worked.
OAS Updates in 2025
- Basic Eligibility: Available to citizens or legal residents aged 65+, based on years lived in Canada after age 18.
- Payment Amounts:
- Ages 65–74: Up to $727.67/month
- Ages 75+: Increased to $800.44/month
- Clawback Rule: If your net annual income exceeds $90,997, your OAS will be reduced. At $148,605, it’s fully clawed back.
How the OAS Increase Helps
Seniors aged 75 and older will automatically receive a 10% boost in their monthly OAS. This recognizes that older seniors often face rising costs and may struggle more with limited income or higher healthcare expenses.
How to Maximize CPP and OAS Benefits
While the increases are helpful, some smart planning can help you get even more out of your pension.
1. Start Early with CPP Contributions
The more years you contribute, the higher your pension will be. Starting early means you’re building toward the maximum payout.
2. Delay CPP Payments
Waiting until age 70 to collect CPP can raise your payment by up to 42%. If you don’t need the money right away, delaying gives you a larger monthly income later on.
3. Minimize OAS Clawback
If your income is close to the clawback threshold, consider using tools like a TFSA or RRSP to lower taxable income and protect your OAS payments.
4. Review Your Pension Forecast
Use the Government of Canada’s online tools to check your CPP and OAS estimates. This helps you plan when to retire and how much you’ll receive.
In 2025, Canada’s pension system is taking a positive step forward. With larger CPP benefits and a significant OAS boost for those 75 and older, the goal is to provide seniors with the support they need to live comfortably. Whether you’re close to retirement or already collecting benefits, it’s the perfect time to review your plan and make any necessary adjustments.
FAQs
How much will CPP pay in 2025?
Up to $1,306.57 monthly for new beneficiaries at age 65.
Who gets the 10% OAS increase?
Seniors aged 75 and older automatically receive it in 2025.
What is the new CPP max earnings?
It rises to $79,400 in 2025.
When does OAS clawback start?
At incomes above $90,997 per year.
Can I delay CPP for higher payouts?
Yes, delaying until 70 can increase payments by up to 42%.
