The government of Canada runs four major schemes under which it pays a pension to the eligible beneficiaries. These are:
|Pension Schemes||Key Features|
|Guaranteed Income Supplement (GIS)||a) Monthly tax-free benefits are available once you cross 65 years of age|
b) The amount you get depends upon your – Marital status and Annual income
c) The highest monthly amount that you can get under GIS is $968.86
|Canada Pension Plan (CPP)||a) It is a lifetime retirement benefit that you get after 60 years of age |
b) To get a pension under this scheme, you must have made at least one valid contribution to CPP
c) Ideally, most people prefer taking a pension at the age of 65. If you do this, you can get a maximum pension of $1,253 per month
|Canada Pension Plan Disability (CPPD)||a) If you are less than 65 years and are suffering from any long-term mental or physical disability, you can get money under CPPD|
b) In 2022, the maximum amount that you can get is $1,464.83
c) Additionally, you can also get CPPD Post Retirement Disability Benefit if you are between 60 and 65 years of age
d) The maximum you can get is $524.64 per month
|Old Age Security Pension (OAS)||a) You start receiving a pension under OAS after you have turned 65|
b) What you get depends upon – Your income and How long have you lived in Canada or certain specified countries
c) If you are a recipient of OAS, you can also avail of the benefits of GIS
What Does It Look Like in The Rest of The World? – The Top Three
The pensions – a government can afford to pay depend upon – its leadership, economic status, GDP, and the number of beneficiaries. As per the report issued by the Mercer CFA Institute Global Pension Index 2020, the Netherlands* has the best pension system in the world.
*It must be noted that in the entire of Western Europe, the Netherlands pays the lowest in child benefits.
After the Netherlands, the pension system of Denmark and Israel are the best. Let us study these highest index grade countries:
1. Netherlands – Index value 82.6
In 2019, the Dutch pension fund held $1.7 trillion of assets. The pension fund assets were about 191% of the GDP. Presently, you can get benefit of a Dutch pension after you have completed 66 years and four months.
To claim a full pension (100%), you must have lived or worked in the Netherlands for 50 years. In effect, one year in which you lived or worked represents 2%. For example, if you have lived or worked in the Netherlands for 20 years, you will get only 40% of the state pension.
If you are not eligible for a full pension, you can opt for an AIO supplement. It aims to match your income with the Dutch-guaranteed minimum income. In 2020, the maximum AIO supplement was €1,250.05 per month.
2. Denmark – Index Value 81.4
Presently, the retirement age in Denmark is 67 years. This age is expected to get revised to 68 in 2030. There is a public pension scheme in force in Denmark, which can be divided into three broad categories. These are:
|Pension Schemes||Key Features|
|Basic Pension Scheme||a) Under the basic pension, you can get DKK 6,237 per month or DKK 74,844 per year. This amount represents around 18% of average earnings|
b) The basic pension is subject to an earnings test.
c) In it – The basic pension will be reduced if earned income exceeds DKK 322,500
d) The benefit is reduced at a rate of 30% against earned income above this level
|Full Pension Supplement||a) If your financial position is considerably degraded, you can avail of the full pension supplement in addition to the basic pension.|
b) You can get: DKK 6,728 per month or DKK 80,736 per year for single pensioners and DKK 39,996 per year for married or cohabiting pensioners.
c) A supplementary pension benefit of DKK 17,200 is also available to the eligible beneficiaries. This benefit is taxable and is paid once a year.
|Defined Contribution Plan – ATP||a) ATP (the Danish Labor Market Supplementary Pension) is a defined contribution plan, which is an insurance-based contribution scheme. |
b) It covers all types of wage earners and recipients of social benefits and provides a lifelong pension.
c) Its membership is voluntary, and you are required to contribute a fixed amount.
d) In 2017, a full-time employee was required to contribute DKK 3,408 annually
3. Israel – Index Value 74.7
Israeli residents get a pension from the National insurance Institute after crossing their pension age. For men, it is 67 years ,and for women, it is 62 years.
Israel pays a pension of ILS 8,648 per month, whereas the annual pension is ILS 18,372. A couple gets ILS 27,612. Those who are 80 or above are paid a higher annual pension of ILS 19,404. Wherewas, for couples, it is ILS 28,644.
Additionally, an income supplement is also paid to take the total income to the minimum level of subsistence. The rate for such income support varies from 32.21% to 74.02% of the old-age basic amount and depends upon age, marital status, and household’s size.
Is Canada’s Pension System the Best?
As per the Mercer Global Pension Index 2020, Canada is ranked ninth in the list of the best pension systems in the world. It has got an index value of 69.3
These statistics state that Canada has done well in extending social security benefits to its citizens.
However, there is still hope, and it can improve its ranking by pushing people to:
- Increase the household savings
- Reduce the overall household debt
Additionally, since technology has given a boost to life expectancy, Canada can also prompt older workers to participate in economic activities. This will reduce the burden of pensions on the state exchequer.
Thus, on an overall note, it can be said that Canada’s pension system is not the best, but it is among the top ten best pension systems in the world. It is even ranked higher than UK, Germany, Switzerland, and USA.