Canada: Federal Budget 2016 – Pension Issues

In its 2016 budget (Budget), the federal government announced a number of pensions matters, which are discussed below.

PENSION BENEFITS STANDARDS ACT (PBSA) – 30-PER-CENT RULE AND BILATERAL AGREEMENTS

The Budget announces that the federal government will shortly be launching a public consultation on the usefulness of the 30-per-cent investment restriction, which restricts pension plans from holding more than 30 per cent of the voting shares of a corporation.

The federal government additionally stated that it proposes to broaden the scope of its ability to enter into with bilateral agreements with provinces under the PBSA, so that the federal and provincial governments can better oversee certain pension plans.

PENSION INCOME SPLITTING UNAFFECTED

The Budget proposes to eliminate income splitting for couples with minor children but expressly states that pension income splitting will not be affected by this change.

ENHANCING THE CANADA PENSION PLAN (CPP)

The Budget notes that in December 2015 the federal government began discussions with the provinces and territories on enhancing the CPP. The federal government's stated goal is to be able to make a collective decision before the end of 2016. The Budget announces that the federal government will launch public consultations in the coming months to obtain views on the enhancing the CPP.

OLD AGE SECURITY (OAS) AND GUARANTEED INCOME SUPPLEMENT (GIS)

As expected, the Budget proposes to cancel the provisions of the Old Age Security Act that increase the age of eligibility for OAS and GIS benefits from 65 to 67 and allowance benefits from 60 to 62. Also higher GIS and allowance benefits will be provided in certain circumstances. The federal government also states that it is committed to ensuring that OAS and GIS keep pace with the actual costs of living faced by seniors and is looking at ways to develop a new Seniors Price Index. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.