0120-combined

Introduction to Financial Security Systems

Overview: Provides a flat monthly pension for Canadians aged 65 and older, financed from general tax revenues.
Key Historical Changes:
- 1952: Introduced as a universal benefit (initially at age 70, $40/month).
- 1965: Age reduced to 65; benefit increased; Guaranteed Income Supplement (GIS) added (1967).
- 1972: Benefits indexed to cost of living.
- 1989: Introduction of clawback provisions for high-income earners.
- 2013: Options to defer payments (up to 5 years) and automatic enrollment.
- 2022: Additional 10% increase for those 75 and older.

Begins at age 65 (maximum monthly amounts as of Jan-Mar 2025: $727.67 for ages 65-74; $800.44 for ages 75+).
Defer for up to 60 months, incurring a 0.6% increase per month of deferral (36% max if deferred until age 70).
Taxable income with clawback provisions for high-income retirees.

Requirements: Age and residency criteria are critical.
Residency Rules:
- Pre-1977: Requires 40 years in Canada post-18, among other specific conditions.
- Post-1977: 40 years of total residency required; proportionate benefits available for 10-40 years.

Increasingly popular as alternatives to RPPs.
Advantages: No plan registration, flexible contributions, lower management fees.
Disadvantages: Employer contributions count as taxable salary, uncertainty on retirement income utilization.

Launched in 2009, allows tax-free savings with eligibility from age 18.
Contributions are made with after-tax income; withdrawals are not taxed, do not affect means-tested benefits.