As 2025 progresses, both the Canada Pension Plan (CPP) and Old Age Security (OAS) are undergoing significant changes, impacting retirees and those planning for retirement.
CPP in 2025
The Canada Pension Plan (CPP) has seen an increase in the maximum monthly payments from $1,364.60 in 2024 to $1,433.00 in 2025, marking a 2.6% rise due to the annual inflation adjustment, which is determined by the Consumer Price Index (CPI) changes from the previous year. This increase reflects efforts to maintain the purchasing power of retirees despite inflationary pressures.
Moreover, the enhancements that began in 2019 are contributing to increased benefits, affecting both current and future retirees by gradually increasing their retirement payouts, especially for those who contribute at the higher end of the income spectrum up to the Year’s Additional Maximum Pensionable Earnings (YAMPE) of $81,200.
OAS in 2025
The Old Age Security (OAS) program continues to index benefits quarterly to protect seniors against inflation, ensuring that benefits adjust every three months to the CPI. There is an ongoing 10% increase for seniors aged 75 and over, a policy initiated in 2022 to provide greater support to older Canadians.
However, for the first quarter of 2025, the OAS payments have remained steady at $727.67 for ages 65 to 74 and $800.44 for those 75 and older due to minimal fluctuations in the CPI.
Contributions and Impact
With the enhancements to the CPP that began in 2019, both employee and employer contribution rates have risen to 5.95% on earnings up to the YMPE of $71,300. These additional contributions are designed to boost future benefits, ensuring that retirees can rely on a more substantial CPP payout in their later years. The aim is for CPP to eventually replace up to 33% of a retiree’s pre-retirement income, compared to 25% under the old structure.
Planning for Retirement
Despite the increases in benefits and more robust contribution structures, Canadians are encouraged to consider supplementary retirement planning strategies. Options such as investing in diversified assets or utilizing savings vehicles like RRSPs and TFSAs can provide additional security and income during retirement, bridging any gaps that CPP and OAS may not fully cover.