Did You Know the RRSP and OAS Benefit Celebrate Milestones This Month?

March 13 and 14 are important days in Canadian financial history as both the RRSP and Old Age Security Benefit celebrate their birthdays.

About the RRSP

The RRSP turns 61 years old on March 14. Introduced in 1957—five years after the OAS was introduced in 1952, and nine years before the introduction of the Canada Pension Plan—it remains a great tax planning tool, although it has some stiff competition today.

Elizabeth Shilton, a senior fellow at the Centre for Law in the Contemporary Workplace at Queen’s University in Kingston, Ontario, was quoted in an article in Canadian Business magazine a year ago: ”RRSPs were part of a post-war wave of initiatives designed to build the Canadian social safety net.”

Shilton, who has written about the history of Canadian pension plans, noted in that article that it has taken RRSPs a long time to catch on. She pointed out that, while contributions have increased over the years, “it’s never been a huge success,” stating that RRSPs are of value only when people pay taxes, and are of significantly more value as people pay higher rates of taxes. However, this could all change as more women are encouraged to enter the workforce, a focus of the current federal budget. Still TFSAs, introduced in 2009, provide added advantages: tax-deferred growth and no tax on withdrawals—making this newer type of savings vehicle a great competitor to the RRSP.

About Old Age Security

Excerpted from the Globe and Mail's newsletter and Facebook page:

The Old Age Pensions Act was passed in 1927, providing “British subjects aged 70 or over who had lived in Canada for 20 years . . . a maximum of $240 a year – equivalent to about $3,436 today. Eligibility was capped by a strict means test some considered humiliating, and Status Indians were excluded. But it marked a first attempt at providing nationwide benefits to help lift elderly Canadians out of deepest poverty, laying a foundation for modern-day Old Age Security and the Canada Pension Plan.” — James Bradsha

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