As the population ages and life expectancy increases, pension plans have become an essential aspect of financial planning for retirement in Canada. A pension is a retirement plan that provides individuals with a regular income stream after they stop working. In Canada, there are two types of pension plans: government-sponsored plans, such as the Canadian Pension Plan (CPP) and Old Age Security (OAS), and employer-sponsored plans, such as a company pension or a group registered retirement savings plan (RRSP).
The CPP is a mandatory pension plan for all working Canadians aged 18 and above. It is funded through contributions from employees, employers, and self-employed individuals, and it provides a monthly retirement pension to individuals who have made enough contributions throughout their working years. OAS, on the other hand, is a government-funded pension plan that provides a basic income to seniors aged 65 and above. It is available to all Canadians, regardless of their work history, residency status, or income level. These government-sponsored plans serve as the foundation of retirement income for many Canadians.
In addition to government-sponsored plans, many Canadians also have access to employer-sponsored pension plans. These plans are set up by employers to provide employees with retirement benefits. The most common type of employer-sponsored plans are defined benefit (DB) pension plans, where the employer guarantees a certain level of retirement income based on an employee