Canada Pension Plan, Old Age Security, and The Bridge Benefit: Explained

When planning for your retirement, there’s a lot to consider. Having different income streams, age thresholds, and eligibilities, all impact your pension. Understanding how different programs work together is incredibly important for making informed decisions about your finances and feeling confident in your retirement. In this blog, we review the different workplace and government pension programs, and how PSPP fits into your overall retirement plan as a Provident10 member. 

For most Provident10 members, retirement income has three main sources: 

1. Workplace sponsored: Public Service Pension Plan (PSPP) 

2. Government sponsored: Canada Pension Plan (CPP) and Old Age Security (OAS)

3. Individually sponsored: Registered Retirement Savings Plan (RRSP), Tax Free Savings Account (TFSA), or other investments. 

What is the Public Service Pension Plan (PSPP)? 

The Public Service Pension Plan (PSPP) is Provident10’s Defined Benefit (DB) pension plan. PSPP pension benefits are secure and paid for the rest of your life.  

PSPP is integrated with the CPP. This is important to note because eligible members who retire before age 65 will receive a temporary Bridge Benefit, which is payable until age 65 (keep reading to learn more about the Bridge Benefit).  

Plan members and participating employers contribute equally to the PSPP fund, and these contributions are invested and managed by Provident10’s investment professionals to generate investment income to support the plan’s benefits. 

You can find an in-depth plan overview in the Member Handbook.  

When Are You Eligible?  

To receive your PSPP pension, you must:  

1. Be vested in the Plan 

• You must have at least five years of credited service to be eligible for a pension. 
  • Your five years of credited service doesn’t have to be consecutive. 
  • Purchasing or buying back service may help you become vested. Learn more about purchasing and transferring service. 
• If you’re  not vested, you’re entitled to a refund of your pension contributions plus interest, which may be paid in cash or transferred to an RRSP, subject to applicable requirements. 

2. Meet the age and service requirements for retirement 

• The Plan’s normal retirement age is 65, but you may be eligible to retire earlier depending on your age and credited service. 
  • Early retirement: You may be eligible to retire as early as age 60 if you have 10 or more years of credited service. 
  • Advanced retirement: You may be eligible to retire as early as age 58 if you have 30 or more years of credited service. 
• Depending on when you retire and your credited service, your pension may be reduced or unreduced. 
  • Learn more about when you can retire. 

3. Be retiring from full-time employment with a participating employer 

• You must have retired, or be retiring, from full-time employment with one of the Plan’s participating employers. This includes full-time seasonal employment. 
  • You cannot receive your PSPP pension while you’re employed full-time by a participating employer and contributing to the Plan. 

How is Your PSPP Payment Calculated? 

PSPP is a Defined Benefit plan, meaning Provident10 uses a formula for calculating your pension. The formula is:  

2% of your Highest Average Earnings (HAE) x Years and Months of Credited Service. 

You can use Provident10’s pension calculator to get an estimate of your pension earnings.  

What is the Canada Pension Plan (CPP)? 

The Canada Pension Plan (CPP) is an earnings-based, retirement income program. CPP is indexed and adjusted annually in January. CPP is funded by contributions from people employed in Canada (excluding Quebec), their employers, and the revenue earned from investments. From age 18, if your total annual earnings are above $3,500, CPP contributions are mandatory, however you can opt-out of contributing to CPP after age 65.  

CPP is managed by the federal government in collaboration with the provinces. If you’re eligible, you’ll receive CPP benefits for the rest of your life.  

When Are You Eligible? 

To receive your CPP pension, you must: 

1. Be between 60 and 70 years old: 

• You can start receiving CPP as early as age 60 or as late as age 70. 
  • Starting at 60 = smaller monthly payments.  
    • Payments decrease by 0.6% each month (7.2% per year), up to a maximum reduction of 36% if you start at age 60. 
  • Starting after 65 = bigger monthly payments.  
    • Payments increase by 0.7% each month (8.4% per year), up to 42% at age 70. 
    • There’s no benefit to delaying CPP as the maximum monthly amount is reached at age 70. 

2. Have made a valid contribution to the CPP. 

• This includes work inside of Canada or credits from a spouse/common-law partner after a divorce or separation. 

3. Have submitted an application to Service Canada. You can apply online on the Government of Canada website.  

• To ensure you start receiving your CPP pension on your chosen start date, you can apply up to 12 months in advance of your chosen start date.  
  • Note: You’ll receive a decision on your CPP application within 28 days of it being received via mail.  

How is Your CPP Payment Calculated? 

The CPP is an earnings-based benefit, meaning what you receive is based on your contributions.  

Your benefit is impacted by: 

• Your age when you retire. 
• How much you contributed. 
• How long you contributed. 
• Your average earnings. 
• Other situations such as divorce and separation, and periods of low or no earnings.  

You can get a your CPP estimate using your My Service Canada Account (MSCA). 

What is Old Age Security (OAS)? 

Old Age Security (OAS) is a pension program funded by the Government of Canada through tax revenues (not employment contributions like PSPP or CPP). OAS is indexed quarterly to reflect increases in the cost of living.  

You’ll be automatically enrolled in OAS and Service Canada will inform you of your enrollment by mail, however if you don’t receive confirmation of your enrollment, you may need to apply. 

If you’re eligible and begin receiving OAS at age 65, your pension payments will generally start the month after your 65th birthday. You can also choose to delay your OAS pension to receive a higher monthly amount later. If you’re eligible, you’ll receive OAS benefits for the rest of your life. 

When Are You Eligible?  

To receive your OAS pension, you must: 

1. Be 65 years old. 

• If you wait until after age 65 to start your OAS pension, payments increase by 0.6% each month (7.2% per year), up to 36% at age 70. 
  • There’s no benefit to delaying OAS benefits past age 70. 

2. Spent time living in Canada after age 18.  

• If you’re currently living in Canada, you must: 
  • Be a Canadian citizen or a legal resident. 
  • Have been living in Canada for 10 years since age 18. 
• If you’re living outside Canada, you must: 
  • Have been a Canadian citizen or a legal resident of Canada on the day before you left Canada. 
  • Have lived in Canada for at least 20 years since the age of 18. 
  • If you lived or worked in a country that has a social security agreement with Canada, the agreement may help you meet the eligibility requirements for OAS.  

3. You submit a tax return each year.  

• Tax returns are used to determine net income, which determines your OAS benefit.  

How is Your OAS Payment Calculated? 

Your OAS pension is calculated on:  

• Your age 
  • OAS pensions increase 10% the month after you turn 75.  

• Your net income and if you’re within the thresholds.  
  • In 2026, the annual net income thresholds for receiving OAS benefits are: 
    • Less than $152,062 (65 to 74 years old) 
    • Less than $157,923 (75 years and older) 
  • You can learn more about OAS income thresholds on the Government of Canada website.  

• Time spent living in Canada. 

You can estimate your OAS pension by using the OAS Benefits Estimator.  

What is the Bridge Benefit? 

The Bridge Benefit is a temporary, extra pension payment for PSPP members that retire early. 

As PSPP is integrated with CPP from a pension contribution perspective, the Bridge Benefit exists to close the gap in income until you reach age 65 (when you become eligible to receive your unreduced CPP pension). 

Bridge benefit eligibility: 

• You’re under the age of 65 and retired. 
• You’re an eligible PSPP plan member. 

Why Does the Bridge Benefit End at 65? 

The Bridge Benefits ends at age 65 because PSPP is coordinated with CPP. When you reach age 65, you become eligible for your unreduced CPP pension, regardless of when you started receiving CPP benefits. In other words, the Bridge Benefit ends because there is no longer a gap in income after age 65.  

Does My Bridge Benefit Equal My CPP? 

The Bridge Benefit and CPP are not equal. 

Your CPP entitlement is based on contribution history, while the Bridge Benefit is calculated under PSPP rules. 

How is Your Bridge Benefit Calculated? 

The Bridge Benefit is based on the lesser of your highest average earnings (HAE) or the average of the year’s maximum pensionable earnings (YMPE) for the 36 months before the month you retire. The formula used to determine your Bridge Benefit is: 

0.6% x HAE (or three-year average of YMPE) x number of years of service* 

*The maximum number of years of service used to determine your bridge benefit is 35 years. 

What If I Start CPP Before or After 65? 

Taking CPP early or later doesn’t change when the Bridge Benefit ends. The Bridge Benefit ends at age 65 for everyone.  

• You could receive both CPP and the Bridge Benefit between ages 60 and 65 if you choose to start CPP early. This is because CPP earnings are reduced before age 65. 
• The Bridge Benefit still ends at age 65, even if you don’t start CPP until a later age. This is because CPP earnings are unreduced after age 65.  

Questions PSPP Members Should Ask Before Retiring 

Planning for your retirement looks a little different for everyone, but we hope this blog shed some light on the different pension programs PSPP members may be eligible for. 

No matter your proximity to retirement, some key considerations to think about are: 

• How much of my retirement income will come from PSPP, CPP, and OAS? 
• Should I start CPP before, at, or after age 65? 
• How will my income change when the Bridge Benefit ends? 
• Am I eligible for an unreduced OAS pension? 
• How do my personal savings fit into my retirement income picture? 
• Have I reviewed my pension estimate and retirement projections? 

If you are a PSPP member planning to retire in the next six to 12 months, congratulations! Provident10 offers Retirement Ready virtual sessions to help members feel confident in their retirement journey. You can find and register for upcoming sessions on the Members Information Sessions page.  

About Provident10 

Since 2017, Provident10 has been serving the public service employees of Newfoundland and Labrador. At more than 68,000 members (and growing), we are one of the largest public service pension plans in Atlantic Canada. 

We deliver plan administration services and oversee management of the Public Service Pension Plan investment portfolio with one goal in mind: protecting the financial health of the Plan and helping Plan members navigate their pension journey.