In this article, you will find a vivid discussion on Inflation Rate VS OAS and CPP: What’s The Effect of Inflation Hike on CPP and OAS? Please read this post and get to know in detail about your retirement income.
Inflation Rate VS OAS and CPP
A hidden tax that affects everyone worldwide is inflation. The government has promised to minimize the issue by expanding social programs including Old Age Security (OAS) and the Canada Pension Plan (CPP).
Based on a comparison of the prices consumers pay for a basket of commodities over time, the Consumer Price Index (CPI) determines increases in CPP and OAS payouts. Because of this, beneficiaries’ lives are made more accessible and the inflation rate compared to OAS and CPP demonstrates positive growth.
Quarterly OAS calculations are made in line with the elevated CPI, while CPP benefits are computed in January. In order to reflect the higher cost of living brought on by the inflation hike, adjustments are made to both CPP and OAS payouts. In order to better understand the inflation rate versus OAS and CPP dynamics, please read this post.
What is the Inflation Rate in Canada in 2024?
The rate of price growth during a specific period, often a year, is defined as inflation by the International Monetary Fund (IMF). According to the Bank of Canada, inflation will range from 2% to 3% by 2025, staying around 3.5% until the middle of the year.
One can use inflation to assess a specific cost, like the price of gas, a haircut, or a loaf of bread, or it can be used as a general indicator of how much living expenses are in a given nation. A person’s capacity to save for the future might be impacted by inflation in addition to the daily costs of living.
Inflation Rate VS OAS and CPP Overview
|Inflation Rate VS OAS and CPP
|Adjusted According to
|CPP Increase Rate 2024
|OAS Increase Rate
|1.3% quarterly basis
What’s The Effect of Inflation Hike on CPP?
Since the Consumer Price Index is used to compute CPP Payment increases each year in January, 2024 will probably see another hike. The highest pensionable income under the CPP will rise to CAD 68,500 in 2024 from CAD 66,600. Employers’ and employees’ rates will remain at 5.95% and 11.9% in 2024, respectively, while self-employed people’s rates will remain unchanged.
Earnings that fall between the newly determined additional highest pensionable income amount (CAD 73,200 for 2024) and the annual maximum pensionable earnings limit of CAD 68,500 will be subject to additional CPP contributions of 4% for both employers and employees as of 2024.
What’s The Effect of Inflation Hike on OAS?
The quarterly adjustments to Old Age Security increase in step with inflation. It is based on how the average CPI differs between two sets of three-month intervals. During the October–December 2023 quarter, OAS payments will rise by 1.3%. The cumulative increase in these payments over the last year was 3.2% (October 2022 to 2023).
Your payments will increase by the amount determined by comparing the average CPI for the previous quarter to the average CPI for the last three months. This calculation is done quarterly. In 2024, Canadians’ Old Age Security may receive a raise from 86,912 CAD to 90,997 CAD.
Canadians’ Old Age Security may rise from 86,912 CAD to 90,997 CAD. According to the CRA, the current maximum pensionable earnings under the Canada Pension Plan, which stands at 66,600 CAD, will rise to 68,500 CAD.
The government has extended the security payment perimeter. Payments for OAS and CPP will increase in 2019. Regretfully, seniors and retirees have experienced less inflation than they would have liked.
You should, therefore, continue to contribute to your retirement savings in addition to this, even if you have to make a bit of monthly adjustment to account for inflation.
Now, we would like to end this post on Inflation Rate vs CPP vs OAS, but we are open to talking in the comment section.