Saskatchewan introduces 6% PST on insurance premiums

As of August 1, 2017, the Saskatchewan PST tax applies to premiums, fees and charges for most insurance coverage including individual and group insurance such as life, mortgage, disability and supplemental health care (e.g. drugs, dental, vision or hearing care) coverage.

Similarly, PST will also apply to benefits plans including Administrative Services Only (ASO) arrangements, funded and unfunded benefit plans and qualifying trusts.

Individual permanent life insurance policies, including whole and universal life insurance, in effect prior to August 1, 2017, are exempt from PST, including all future premium payments with respect to these policies.

However, new individual permanent life insurance policies effective after July 31, 2017, will be subject to PST. Endorsements added to insurance contracts with an effective date prior to August1, 2017, are also not subject to PST.

Employee premiums under group insurance plans are taxable depending on both the place of employment and residency. An employee must live and work in Saskatchewan for the employee premiums to be taxable.

Taxability of Group Insurance Premiums
Where the employee lives Where the employee works Employer premiums Employee premiums
Saskatchewan Saskatchewan Taxable Taxable
Outside Saskatchewan Saskatchewan Taxable Exempt
Saskatchewan Outside Saskatchewan Exempt Exempt

SOURCE: Aon Hewitt Consulting

Where there is an Administrative Services Only (ASO) agreement (a contract between an employer and a third-party administrator), the premiums or payments to claimants can include dues, assessments, administrative costs and fees paid for the administration of the plan. PST will be collected on these charges and also on the premium or the payment of benefit amounts.

Several other provinces also currently charge retail sales tax on all insurance premiums including Ontario (8%) and Quebec (8%). Manitoba applies 8% RST only to life, disability, critical illness and AD&D premiums.

The polling firm, Insightrix, asked 802 respondents:  “How will your household change its insurance purchasing plans once PST is charged on all insurance premiums?” That question prompted the following responses:

  • 20.3%: Reduce insurance coverage (such as downgrading the level of home insurance coverage, purchasing less crop insurance, etc.)
  • 13.8%: Stop renewing some policies (such as cancelling a package policy on a vehicle)
  • 48.6%: Our household won’t change its insurance purchasing plans;
  • 25.4%: Not sure

“Charging the PST on insurance comes with an obvious risk,” says Todd MacKay, the Canadian Taxpayers Federation Prairie Director. “Hitting premiums with the PST will run up insurance costs by hundreds of dollars for families and thousands or tens of thousands of dollars for farmers and small businesses. More than a third of Saskatchewanians say they’ll have to reduce coverage or stop renewing some policies and that means people will have less protection when bad things happen.”

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Nov 13: Best from the blogosphere

It’s personal finance video time again! This week we present timely videos about extended warranties, the Equifax security breach, the new mortgage stress test and more.

In the wake of the pending demise of Sears, Jacqueline Hansen from CBC Business News reports on what it means for customers with extended warranties.

Rob Carrick outlines the steps Canadian should take to deal with the Equifax security breach which exposed the personal information of tens of thousands of people

In Episode 125 of her podcast series, Jessica Moorehouse interviews Chris Guillebeau author of the new book “Side Hustle from Idea to Income in 27 Days.”

Do you think you should be earning more at your job? Bridget Casey from Money After graduation has some hints about how to ask for a raise in her video “How to Negotiate Your Salary | ASK FOR $5,000+ MORE.”

This video from The National explores how the new mortgage stress test for borrowers with uninsured loans is designed to ensure they can withstand higher mortgage rates.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Nov 6: Best from the blogosphere

We are again going to sample recent material from a series of bloggers who participated in The Canadian Financial Summit in September.

This week headlines across the country blared that CRA has changed their position on allowing diabetics to claim lucrative disability tax credits in certain cases.

On Your Money, Your Life, accountant Evelyn Jacks discusses why these changes are being made and how audit-proofing strategies must be implemented by tax professionals and their diabetic clients.

Andrew Daniels writes at Family Money Plan about how he paid off his mortgage in 6 years. Five of the 28 things he and his wife gave up to quickly pay down his mortgage are noted below:

  • Eating out, largely due to food sensitivities and allergies with the added bonus that they saved big bucks.
  • For the first five years of the pay down period they gave up travel.
  • They went without cell phones for four of the six years of paying off their mortgage
  • They opted to repair their old cars as required rather than buying new ones.

Jonathan Chevreau, CEO of the Financial Independence Hub notes in the Financial Post that Only a quarter of Canadians have a rainy day fund, but more than half worry about rising rates.

This is based on a survey of 1,350 voting-age adults by Forum Research Inc. conducted after the Bank of Canada raised its benchmark overnight rate from 0.75% to 1% on Sept. 6, the second increase in three months. That said, 17% believe rate hikes will have some positive aspects: Not surprisingly, debt-free seniors welcome higher returns on GICs and fixed-income investments. Another 38% don’t think it will have an effect either way.

Do you know how long it will take to double the money you have invested? MapleMoney blogger Tom Drake explains the rule of 72 which take into account the impact of compound interest and  allows you to get a quick idea of what you can achieve with your money.

For example, if you were expecting a rate of return of 7% you would divide 72 by 7, which tells you it would take about 10.3 years to double your money at that rate. If you want $50,000, you would need to invest $25,000 today at 7% and let it sit for 10.3 years.

Kyle Prevost explores 5 stupid reasons for not getting life insurance on lowestrates.ca. If your rationale is that you are healthy and never get sick, Prevost says, “Glass half-full thinking is a positive thing, but pretending that your full glass is indestructible is a recipe for disaster.”

And if you have avoided buying life insurance because you have so many other bills you can’t afford it, he says, “You seriously need to ask yourself what sort of situation you’d leave behind if tragedy struck. Those bills that look daunting right now would look downright insurmountable.”

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

What to look for in a long-term care home

When the health or capacity of a loved one deteriorates and the family decides that a nursing home is the best care option, it can be a very traumatic time for both the caregivers and the patient. You want to ensure your parent or friend is placed in a facility where they will get the best possible care in a safe, nurturing environment.

However, depending on the length of waiting lists and where you live, your choices may be very limited. For example, this directory of long-term care providers in Saskatchewan illustrates that in many smaller communities there is only one government-subsidized nursing home. And if a bed becomes available you will likely have to decide whether or not to accept it on very short notice.

Last week we wrote about “What you need to know about residential care for seniors in Saskatchewan” and discussed the difference between retirement homes and nursing homes (special care homes). This week we offer a checklist of things to look for when you are evaluating the suitability of a special care home for your family member.

The Canadian Association of Retired People (CARP) has developed an extensive catalogue of things to look for. Here (in no particular order) are some of my favourites, including questions we asked when my mother recently moved into long-term care.

  1. What is covered in the regular monthly fee and what additional charges can be expected?
  2. Are residents clean, well-groomed and appropriately dressed?
  3. Do they seem happy?
  4. How do family members of current and past residents rate the facility?
  5. What activities are available for residents?
  6. How long have senior staff worked for the residence?
  7. Do staff appear to be happy?
  8. What is the staff-to-patient ratio of PSWs, RPNs and RNs to residents on each shift?
  9. Does the home rotate all staff members or try to keep the person(s) caring for each resident?
  10. Are there any limitations on visiting hours?
  11. How do family members participate in the care plan?
  12. How are care complaints handled and by whom?
  13. Do doctors, physiotherapists, denturists, podiatrists regularly come to the residence for patient care?
  14. Does a hairdresser and manicurist regularly attend to provide personal care?
  15. What resources are available for the care and safety of residents with cognitive impairment?
  16. Are religious holidays and birthdays celebrated? How?
  17. What are the policies and procedures for ensuring that personal clothes and belongings are not lost or stolen?
  18. What is the home’s fall prevention program?
  19. Can the resident bring personal furniture, pictures and other knick knacks?
  20. What are the policies and procedures for handling a resident who is harmful to himself/herself or other residents?
  21. Does the home have a palliative care program?
  22. Will the food appeal to your loved one?
  23. Can a family member have a meal with their loved one? If so, is there a fee?
  24. Are special menus available for people who require soft food or other special diets?
  25. Does the menu suit your loved one’s cultural or religious regulations?

Regardless of the answers you get to these and other preliminary questions, once your loved one moves in, it is important for family and friends to visit as often as possible at various times of the day and in the evening both to keep his/her spirits up and monitor the actual care he/she is receiving. In many cases elderly or infirm patients are incapable of advocating for themselves.

Generally we are very happy with the facility we chose for Mom, but we have to stay on top of things. For example:

  • When she returned to the residence after she broke her hip we had to encourage staff to get her up and walking so she didn’t totally lose her mobility.
  • She is supposed to get her hair done every week and a manicure every two weeks but inexplicably, her name sometimes doesn’t make it onto the list.
  • There is lots of staff, but they are rotated and often it seems like the right hand doesn’t know what the left hand is doing!

By understanding the rules and limitations of the special care home where your loved one resides, you can monitor care more effectively and provide additional support as needed.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Oct 31: Best from the blogosphere

If you buy a house or re-finance your existing home beginning in 2018, you may need a higher income to qualify for a mortgage.  Borrowers who are renewing mortgages will not have to meet the new stress-test standard as long as they stay with the same bank. However, renewals done with another lender will have to qualify under the revised standards because they require new underwriting.

As Sean Cooper explains in What OSFI’s (Office of the Superintendent of Financial Institutions) Tightened Rules on Uninsured Mortgages Means for Homebuyers on RateSupermarket.ca, under these new rules, buyers with a 20% down payment or more will have to undergo a more rigorous stress test, and qualify based on the highest posted five-year fixed rate – 4.64%, roughly 200 basis points higher than actual mortgage rates.

“Last year, in an effort to cool down hot real estate markets in cities like Toronto and Vancouver, Ottawa introduced new mortgage rules on only insured mortgages – meaning those who put less than 20% down.” Cooper notes. “But since then, the uninsured mortgage market has grown. So, to help reign in this segment of the market, OSFI is now proposing extending the stress test to uninsured mortgages.”

Lowestrates.ca blogger Alexandra Bosanac further clarifies in This is how OSFI’s new mortgage rules will affect Canadian homebuyers that the new OSFI rules will apply to buyers who apply for uninsured mortgages including those with a 20% down payment or more and those buying homes worth $1 million or more. “They will be stress tested to show they can afford a mortgage, either at the five-year average posted rate, or two percentage points higher than the rate their bank or broker offers them (whichever one is higher),” she says.

Bosanac offers an interesting example of how the new rule changes will impact homebuyers. A couple buying a home for $500,000 with a $125,000 down payment would be paying $1,743 a month at the the current lowest variable five-year mortgage rate in mid-October available in Ontario of 1.99%. However, under the new rules, that same couple will be stress tested prior to qualifying to ensure they can pay the mortgage at two percentage points higher — 3.99%. That means they will have to be able to show they can afford to pay a mortgage of $2,165 a month. That’s a difference of $422 a month, or $5,064 a year.

Globe and Mail mortgage columnist Robert McLister offers 10 ways the new mortgage rules will shake up the lending market. He suggests  that unless provincial regulators follow OSFI’s lead (which if history is a guide they won’t), it will be a bonanza for some credit unions because many credit unions will still let you get a mortgage based on your actual (contract) rate, instead of the much higher stress-test rate. He expects to see a rush of buying before the end of the year from people who fear they won’t qualify after January 1.

Furthermore, critics say new mortgage rules will push borrowers to unregulated lenders according to Globe and Mail reporters Janet McFarland and James Bradshaw. They spoke with OSFI superintendent Jeremy Rudin who acknowledged that OSFI is offloading risk to the unregulated lending sector, which doesn’t come under federal control, “That would not be an intended consequence, nor would it be a completely unanticipated consequence,” he told reporters.

Former MP Garth Turner blogging at The Greater Fool anticipates that real estate values will decline across the country as a result of the changes, which means home purchases could be a potential wealth trap, particularly for first time buyers who cannot afford losses.

In After Mom, he notes that in order to avoid paying mortgage insurance, many young buyers borrowed from parents to get over the 20% line so they would not have to pay mortgage insurance. As a result CMHC-insured loans plunged more than 40% at the same time real estate activity rose, the number of borrowers increased and overall mortgage debt swelled.

He concludes, “The average down payment gift from parents to kids in households making $100,000 or more is now over $40,000. Let’s hope Mom has a bunch more money to bail junior out when prices fall, rates rise and that first loan renewal comes round. Stress, baby.”

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

What you need to know about residential care for seniors in Saskatchewan

Whether you are a member of the “sandwich generation” with young children and older parents or you are a senior yourself, sooner or later you will need to understand the residential care options in Saskatchewan for individuals who can no longer live at home, and how much they cost.  Typically, residential facilities are characterized as either retirement homes or government-subsidized nursing homes. In the discussion below we distinguish between the two, the services provided and how much they cost.

Retirement home/residence 
A retirement home in Saskatchewan is a multi-residence housing facility that provides accommodation and services such as meals and cleaning for older people. Retirement homes in the province are privately owned and operated and not administered by the provincial government. Each facility usually provides a private or semi-private room or complete living suite as well as common living quarters, including a lounge area, a common dining room, recreation rooms, cleaning services, social and/or religious programs and some basic health care services.

The unit can be paid for on a monthly fee basis, like an apartment, or can in some instances be bought the same way as a condominium. Admission, fees and waiting lists for retirement homes are controlled by the homes themselves, not by the government. Admission usually depends on the ability to pay and absence of serious medical conditions that require professional nursing care. Residents are responsible for paying their own fees and government subsidies are not available for accommodation in a retirement residence.

Costs for Retirement Homes*

Type of Accommodation Provincial Median Provincial Range Regina Median Regina Range Saskatoon Median Saskatoon Range
Private Rooms(per month) $2,475 $1,500 – $5,500 $2,850 $1,800 – $5,500 $2,425 $1,600 – $4,000
1 Bedroom Suites (per month) $3,415 $1,580 – $4,170 $3,750 $3,500 – $4,100 $3,150 $1,580 – $4,042

*As reported in Long Term Care in Saskatchewan 2016

Government-Subsidized Nursing Homes**
Nursing homes or special care homes, as they are called in Saskatchewan, are residential long term care facilities that provide 24-hour professional nursing care and supervision for people who have complex care needs and can no longer be cared for in their own homes.

These facilities are owned and operated by municipalities, religiously affiliated organizations and private, for-profit organizations. However, nursing home fees are set by the Saskatchewan Ministry of Health.

Admissions to residential long term care facilities are managed by local Regional Health Authorities (RHAs). An intake coordinator or social worker from the RHA conducts an in-home assessment with clients and their families to assess care needs and program options, to coordinate access, explain fees and coordinate placement into long-term care facilities.

A report of the assessment is sent to the Regional Committee, who decides on acceptance. Clients who are eligible for access to a long term care bed generally access the first available bed in the system and then transfer to a facility of choice. A chronological wait list is maintained by the RHA to ensure fair and equitable access to a facility of choice.

Eligibility/Requirements for Admission 
To be eligible for subsidized care services, a client must:

  • Be a Canadian citizen or permanent resident over 18 years of age.
  • Require ongoing care (usually 24 hour care, seven days a week) due to age, disability, injury from accidents, or long-term illness.
  • Hold a valid Saskatchewan Health Services card, or be in the process of establishing permanent residence in Saskatchewan and have applied for a Saskatchewan Health Services card.

Income/Asset Test
The client’s income is assessed by Saskatchewan Health.  Income Tax returns of applicants are reviewed once the Regional Committee has approved the admission of the client into a nursing home. The client’s application is sent by the RHA to the nursing home, which in turn sends it to Saskatchewan Health for income assessment.

A resident pays the standard resident charge ($1,086 at July 1, 2017) plus 57.5% of the portion of their income between $1,413 and $4,200. For married residents, including common law couples, the couple’s income is combined, divided equally and then the above formula is applied.

The resident and spouse (if applicable) are required to provide:

  • The most recent year’s Notice of Assessment(s) from CRA, or
  • Pages 1 to 3 of Income Tax Return(s) upon admission and annually thereafter.

If income information is not provided, the resident charge will be assessed at the maximum rate.

A resident admitted for temporary care must pay the income-tested resident charge if their stay is more than 60 consecutive days.

Examples of resident charges at various income levels

Monthly Income Monthly Resident Charge
$1,413 $1,086 (minimum)
$2,000 $1,423
$2,500 $1,711
$3,500 $2,286
$4,200 $2,689 (maximum)

 

Married residents living in separate special care homes 
Married residents who live in separate dwellings for reasons beyond their control may choose to complete an Optional Designation Form.

  • With this designation, only the resident’s income is considered when calculating the charge.
  • Choosing this designation does not change a couple’s marital status.

Additional charges
In addition to the resident charge, there is an additional cost for prescriptions, medications, incontinence supplies, and certain medical and personal supplies and services.

There is also a $21.25 monthly supply charge for personal hygiene items, such as shampoo, conditioner, soap, denture cream, toothpaste, mouthwash, etc. This charge is adjusted annually based on increases to Old Age Security and Guaranteed Income Supplement benefits

** As reported in Special Care Homes

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Oct 23: Best from the blogosphere

Sustaining a blog for months and years is a remarkable achievement. This week we go back to basics and check in on what some of our favourite veteran bloggers are writing about.

If you haven’t heard, Tim Stobbs from Canadian Dream Free at 45 has exceeded his objectives and retired at age 37. You can read about his accomplishment in the Globe and Mail and discover how he spent the first week of financial independence here.

Boomer & Echo’s Robb Engen writes about why he doesn’t have bonds in his portfolio but you probably should. He acknowledges that bonds smooth out investment returns and make it easier for investors to stomach the stock market when it decides to go into roller coaster mode. But he explains that he already has several fixed income streams from a steady public sector job, a successful side business and a defined benefit pension plan so he can afford to take the risk and invest only in equities.

On My Own Advisor, Mark Seed discusses The Equifax Breach – And What You Can do About It. In September, Equifax announced a cybersecurity breach September 7, 2017 that affected about 143 million American consumers and approximately 100,000 Canadians. The information that may have been breached includes name, address, Social Insurance Number and, in limited cases, credit card numbers. To protect yourself going forward, check out Seed’s important list of “Dos” and Don’ts” in response to these events.

Industry veteran Jim Yih recently wrote a piece titled Is there such a thing as estate and inheritance tax in Canada? He clarifies that in Canada, there is no inheritance tax. If you are the beneficiary of money or assets through an estate, the good news is the estate pays all the tax before you inherit the money.

However, when someone passes away, the executor must file a final tax return as of the date of death.  The tax return would include any income the deceased received since the beginning of the calendar year.  Some examples of income include Canada Pension Plan (CPP), Old Age Security (OAS), retirement pensions, employment income, dividend income, RRSP and RRIF income received.

When the Canadian Personal Finance Blog’s Alan Whitton (aka Big Cajun Man) started investing, he was given a few simple rules that he says still ring true today. These Three Investment Credo from the Past are:

  • Don’t invest it if you can’t lose it.
  • Invest for the long term.
  • If you want safety, buy GICs.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Your guide to upcoming CPP changes

In June 2016 federal, provincial and territorial finance ministers finally reached an agreement to expand the Canada Pension Plan. However, because the changes will be phased in over an extended period, there has been considerable confusion among many Canadians about how both CPP contributions and benefits will increase, and who the winners and losers will be.

The Globe and Mail reports that an expanded CPP is designed to address the shortfall in middle-income retirement planning that is occurring as a result of disappearing corporate pensions. “Most at risk are workers under the age of 45 with middling incomes – say, families earning about $50,000 to $80,000 a year,” note authors Janet McFarland and Ian McGugan. “Without the defined-benefit pensions that their parents enjoyed, many could hit retirement with little in savings.”

Here is what you need to know about the planned CPP changes.

Effects on CPP retirement pension and post-retirement benefit:
Currently, you and your employer pay 4.95% of your salary into the CPP, up to a maximum income level of $55,300 a year. If you are self-employed you contribute the full 9%.

When you retire at the age of 65, you will be paid a maximum annual pension of $13,370 (2017) under the program if you contributed the maximum amount each year for 40 years (subject to drop out provisions). People earning more than $55,300 do not contribute to CPP above that level, and do not earn any additional pension benefits.

The first major change will increase the annual payout target from about 25% of pre-retirement earnings to 33%. That means if you earn $55,300 a year, you would receive a maximum annual pension of about $18,250 in 2017 dollars by the time you retire — an increase of about $4,880/year (subject to the phase in discussed below).

The second change will increase the maximum amount of income covered by the CPP (YMPE) from $55,300 to about $79,400 (estimated) when the program is fully phased in by 2025, which means higher-income workers will be eligible to earn CPP benefits on a larger portion of their income.

For a worker at the $79,400 income level, CPP benefits will rise to a maximum of about $19,900 a year (estimated in 2016 dollars). Contributions to CPP from workers and companies will increase by one percentage point to 5.95% of wages, phased in slowly between 2019 and 2025 to ease the impact. The federal finance department says the portion of earnings between $54,900 and $79,400 will have a different contribution rate for workers and employers, expected to be set at 4%.

The enhancement also applies to the CPP post-retirement benefit. If you are receiving a CPP retirement pension and you continue to work and make CPP contributions in 2019 or later, your post-retirement benefits will be larger.

Impact on CPP disability benefit/survivor’s benefit
The enhancement will also increase the CPP disability benefit and the CPP survivor’s pension starting in 2019. The increase you receive will depend on how much and for how long you contributed to the enhanced CPP.

Impact on CPP death benefit
There is currently a one-time lump sum taxable death benefit of $2,500 for eligible contributors of $2,500. This amount will not change.

The main beneficiaries of the CPP changes will be young employees, who are less likely to have workplace pension plans than older workers. To earn the full CPP enhancement, a person will have to contribute for 40 years at the new levels once the program is fully phased in by 2025. That means people in their teens today will be the first generation to receive the full increase by 2065.

The recently released Old Age Security report from chief actuary Jean-Claude Ménard which includes the GIS illustrates how higher CPP premiums scheduled to begin in 2019 will ultimately affect the OAS program.

The report reveals that because of the planned CPP changes, by 2060, 6.8% fewer low-income Canadians will qualify for the GIS, representing 243,000 fewer beneficiaries. This will save the federal government $3-billion a year in GIS payments.

In other words, higher CPP benefits mean some low income seniors will no longer qualify for the GIS, which is a component of the Old Age Security program. The GIS benefits are based on income and are apply to single seniors who earn less than $17,688 a year and married/common-law seniors both receiving a full Old Age Security pension who earn less than $23,376.

Also read: 10 things you need to know about enhanced CPP benefits

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Oct 16: Best from the blogosphere

There is nothing like curling up on the couch to watch a good movie on a chilly, autumn evening. Before you move on to Netflix, here are some great new personal finance videos that will educate and entertain you.

In Money Left on the Table, Kerry Taylor, aka financial writer and blogger Squawkfox is interviewed on the CBC News Network about eligibility for Registered Disability Savings Plans and how to navigate the application process. She says, “There is really limited uptake for this program geared to people with serious, ongoing physical or mental impairment because applying for it is very complicated.”

This video from the Khan Academy clarifies what buying company stock means and clearly identifies the difference between stocks and bonds. The commentator explains, “In the general sense when you buy shares or stock you are essentially becoming a partial or part owner in the company. In contrast, bonds mean you become a lender to the business.”

Accountant and certified financial planner Ed Rempel discusses the meaning of financial independence, the huge difference it makes in your life and what it takes to get there. By helping almost 1000 families put together a financial plan he has gained insights that form the basis of his 6 Steps to Become Financially Independent.

Sean Cooper, blogger and author is interviewed on the Global Morning show about how homeowners will be affected by higher interest rates. Because Cooper paid off his mortgage by age 30 he does not have to worry about the personal impact of these changes. However, he says, “If you are in a variable rate mortgage and rising interest rates are keeping you up at night, it may make sense to lock in right now.”

Planning a vacation? Preet Bannerjee explains the meaning of dynamic currency conversion and why you should always pay in local currency when travelling. When a merchant gives you the option to pay in your home currency and you choose to do so, the process is known as dynamic currency conversion or DCC. You may think you will come out ahead and avoid the 2.5% conversion fee charged by the credit company. But in fact his examples show that credit card companies typically offer a better exchange rate than if the merchant applied DCC and charged customers in their home currency. And some credit cards charge 2.5% on every transaction anyway.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.