Which non-contributory financial plan is taxed as income for a pensioner?

Which non-contributory financial plan is taxed as income for a pensioner?

• A. CPP
• B. Old Age Security (OAS)
• C. GIS
• D. EI

Answer: (B)

Old Age Security is a non-contributory government pension paid to most Canadians age 65 and older. Because it’s funded from general tax revenues rather than employee contributions, it’s classified separately from plans like CPP that are funded by contributions. Importantly, Old Age Security is included in a recipient’s taxable income and must be reported on the personal tax return. This is why it’s described as being taxed as income for a pensioner. It’s also common to encounter the Old Age Security recovery tax (the clawback) for higher-income seniors, which further ties OAS to income-based taxation. CPP is funded by contributions from you and your employer, so it’s a contributory plan, not non-contributory. EI is an employment-insurance program, not a pension. The Guaranteed Income Supplement is another non-contributory program for low-income seniors, but the standard tax treatment discussed in many exams emphasizes Old Age Security as the taxed non-contributory pension.

Old Age Security is a non-contributory government pension paid to most Canadians age 65 and older. Because it’s funded from general tax revenues rather than employee contributions, it’s classified separately from plans like CPP that are funded by contributions. Importantly, Old Age Security is included in a recipient’s taxable income and must be reported on the personal tax return. This is why it’s described as being taxed as income for a pensioner. It’s also common to encounter the Old Age Security recovery tax (the clawback) for higher-income seniors, which further ties OAS to income-based taxation.

CPP is funded by contributions from you and your employer, so it’s a contributory plan, not non-contributory. EI is an employment-insurance program, not a pension. The Guaranteed Income Supplement is another non-contributory program for low-income seniors, but the standard tax treatment discussed in many exams emphasizes Old Age Security as the taxed non-contributory pension.