Big improvements are coming to Canada’s pension system in 2025. Both the Canada Pension Plan (CPP) and Old Age Security (OAS) are getting significant boosts, helping seniors better manage the rising cost of living. Whether you’re already retired or planning ahead, knowing how these changes affect your payments is key to making the most of your retirement income.
Let’s break down the increases, who qualifies, and what you can do to maximize your benefits.
Overview
Starting in 2025, retirees in Canada will see increased payments from two of the country’s main pension programs—CPP and OAS. These enhancements are designed to reflect economic realities like inflation and increased longevity, ensuring seniors can maintain financial stability throughout retirement.
Here’s a quick snapshot of what’s changing:
| Pension Program | Increase in 2025 | Details | Eligibility |
|---|---|---|---|
| Canada Pension Plan (CPP) | Gradual increase by 33% | Part of an enhancement started in 2019. Higher monthly pensions and higher contribution rates. | Workers who contributed to CPP; max pensionable earnings now $79,400 |
| Old Age Security (OAS) | 10% increase for seniors aged 75+ | Automatic boost to monthly OAS payments for seniors 75 and over | Residents aged 65+; full benefits require 40+ years of Canadian residency |
| OAS Clawback Threshold | Increased to $90,997 | Benefits reduce for higher-income seniors; full clawback at $148,605 | Applies to seniors aged 65+, especially those with higher incomes |
Why It Matters
Retirees are facing more challenges than ever—from soaring grocery prices to rising healthcare costs. These pension enhancements are part of a long-term government strategy to help Canadians retire with more peace of mind.
CPP and OAS are the cornerstones of Canadian retirement income. And these updates are meant to keep those foundations strong in the years ahead.
Canada Pension Plan (CPP)
The CPP is a mandatory program funded by your earnings during your working years. You contribute a portion of your income through payroll deductions, and your employer matches it. If you’re self-employed, you pay both portions.
2025 Updates to CPP
- Contribution Rates: Workers will now contribute 5.95% of their income (up from 4.95%). Self-employed individuals contribute 11.9%.
- Earnings Limit: The maximum pensionable earnings increase by 14%, now capped at $79,400.
- Benefit Amount: The maximum monthly retirement pension is $1,306.57 for those who’ve contributed at the maximum level throughout their working years.
- Replacement Rate: Retirement income replacement will now be up to 33% of your pre-retirement earnings (up from 25%).
How This Helps You
If you’ve earned a steady income and contributed consistently, you’ll notice a larger payout starting in 2025. CPP benefits are also adjusted annually to keep up with inflation, ensuring your purchasing power remains stable as prices rise.
Old Age Security (OAS)
OAS is different from CPP. You don’t need to have worked to qualify—eligibility is based on age and residency.
2025 OAS Changes
- Automatic 10% Increase: If you’re aged 75 or older, you’ll receive an extra 10% in OAS payments automatically.
- New Monthly Maximums:
- Ages 65–74: $727.67/month
- Ages 75+: $800.44/month
- Inflation Protection: These amounts will be adjusted quarterly to reflect rising costs.
OAS Clawback Explained
If your net annual income is over $90,997, your OAS payment will start to decrease. The higher your income, the less OAS you receive. If you make more than $148,605, you won’t receive OAS at all.
How to Maximize Benefits
To get the most from your CPP and OAS in 2025, follow these simple strategies:
1. Start Contributions Early
The longer you contribute to CPP, and the higher your earnings, the bigger your payout. Start as soon as you begin working to get full value.
2. Delay CPP if Possible
Waiting to take CPP past age 65 can increase your monthly payment by 0.7% per month, up to age 70. That’s a potential 42% boost if you delay to the maximum age.
3. Minimize OAS Clawback
If your income is nearing the clawback range, consider lowering your taxable income using:
- TFSA withdrawals (not counted as income)
- RRSP contributions
- Pension income-splitting with your spouse
These tactics can help you preserve more of your OAS.
The 2025 pension enhancements are great news for Canadians who rely on government support in retirement. Whether you’re already receiving CPP and OAS or planning for the years ahead, these updates will help you stay ahead of inflation and enjoy more financial peace of mind.
FAQs
What is the new CPP maximum in 2025?
$1,306.57 per month if you contributed fully.
Who gets the OAS 10% boost?
Seniors aged 75 and older starting in 2025.
When does OAS clawback start?
At $90,997 in annual net income.
Should I delay CPP to age 70?
Yes, if you want up to 42% more monthly income.
Are CPP and OAS adjusted for inflation?
Yes, both are indexed to the cost of living.
