You’ll need a plan for your pension in 2013

Canadians can now elect not to receive OAS benefits at age 65

The new year brings in a number of changes in social benefits for Canadians, while the indexing of tax brackets and benefit thresholds affects their take-home pay, starting in January.

You will receive lower Canada Pension Plan benefits if you start receiving them at age 60 next year than if you started at age 60 in 2012. As of the middle of 2013, you can choose not to start receiving Old Age Security pension benefits at age 65 and get a much bigger sum by starting when you’re older. There will be different rules for receiving Employment Insurance benefits as of January. Most people will pay an extra $49.50 in CPP premiums and $51.15 in EI premiums in 2013.

The good news is that Albertans making $50,000 will pay $123.28 less in income tax next year and those making $90,000 pay $191.64 less.

In January, the maximum CPP benefits for most Canadians will increase $25.83 monthly to $1,012.50, or $12,150 annually, while full basic monthly OAS benefits go up $1.09 to $546.07, adjusted quarterly. You’ll be able to put an extra $500 into your TaxFree Savings Account, up to $5,500.

We are in a five-year program, being phased in until 2016, which is aimed at enticing an aging population to stay in the workforce longer and delay receiving CPP benefits. During 2013, maximum monthly CPP benefits will be $684.45 if you start receiving them at age 60, $1,012.50 if you start at age 65 and $1,437.75 if you start at age 70. As of July 1, 2013, people may elect to start receiving OAS benefits at age 70 rather than age 65. At this January’s rate, the full monthly benefit will be $546.07 if you start at age 65, versus $742.66 if you start at age 70.

Beginning in 2013, EI claimants will be tiered as frequent claimants, occasional claimants or long-tenured workers who rarely use the system. The tier that people are in will affect the time in which they are expected to accept jobs in different fields at lower rates of pay.

“The question will be whether workers will remain in regions where industry is heavily reliant on EI as a form of wage supplement,” wrote ATB Financial economist Will van’t Veld. “Or will these individuals pick up and move to provinces where a steady paycheque might be easier to find, like Alberta perhaps?”

Meanwhile, income tax brackets and benefit thresholds for 2013 will be increased for inflation by indexing of 2.0 per cent federally and 1.8 per cent in Alberta. The federal basic personal amount, on which people pay no federal tax, goes from $10,822 to $11,038, after which people start paying 15 per cent. The 22 per cent bracket that started at $42,707 now begins at $43,561. The bottom of the 26 per cent bracket goes from $85,414 to $87,123. And the 29 per cent bracket starts not at $132,406, but at $135,054.

Albertans add a single rate of 10 per cent on taxable income above a basic personal amount that was $17,282 and now is $17,593.

Many employees will see much if not all of their salary increase for 2013 erased on January paycheques as they start paying CPP and EI premiums again. Employers and employees will each pay as much as $2,356.20 for CPP, on pensionable earnings between $3,500 and $51,100. The self-employed pay a maximum of $4,712.40. With EI, employees outside of Quebec will pay a maximum of $891.12, on $47,400 of insurable earnings. Maximum premiums for employers rise by $71.61, to $1,247.57.

Your 2013 registered retirement savings plan contribution room will be 18 per cent of your 2012 earned employment income, topping out at $132,333, for a maximum of $23,840 (increased from $22,970), minus your pension adjustment.

The non-refundable federal tax credit of 15 per cent applies to many indexed amounts. The spousal, common-law partner and eligible dependant amount is $11,038, up $216, minus net income of the spouse or dependant. The disability amount goes to $7,697, a hike of $151.

People can claim the federal credit on medical expenses above the lesser of either three per cent of net income or $2,152, a bump of $43.

For seniors, the federal tax credit for people 65 and older applies on an age amount of $6,954, but begins being clawed back once net income is greater than $34,562 and is lost completely if income is more than $80,258.

The OAS will begin to be clawed back if annual net income exceeds $70,954, and is totally repayable if income is greater than $114,640.

Provincially, Alberta’s basic personal amount of $17,593 is also its spousal and eligible dependant amount. The 10 per cent provincial tax credit applies to an age amount increasing $87 to $4,903, a disability amount rising $240 to $13,571, and medical expenses above the lesser of either three per cent of net income or $2,373, up $40.