Canada Savings Bonds are an option for Canadians looking for investment options. These bonds are issued by the Government of Canada and can be a safe and secure addition to your investment portfolio. Canada Savings Bonds (CSBs) and the Canada Premium Bond (CPBs) both offer a variety of features.

Canada Savings Bonds can be cashed in anytime of the year; the Premium Bonds can only be cashed in once a year. Both types of bonds are backed by the Government of Canada which makes both types of bonds more safe and secure for investors. These bonds are available for purchase for six months per year, beginning in early October until April 1. Be advised however, that the Minister of Finance has the ability to end the sales of these bonds at any time.

CSBs and CPBs are available in either:

Regular Interest Bonds:  These bonds earn simple interest at the rates which are determined by the Minister of Finance until the earlier of maturity and redemption. The simple interest is paid to the bond's owner on each annual anniversary until maturity, or at the time of redemption.

Compound Interest Bonds:  These earn compound interest as well as simple interest. The compound interest rates are determined by the Minister of Finance until the earlier of either maturity or redemption based on the earned interest on each annual anniversary of the issue date prior to maturity. Compound interest is payable at the time of redemption.

Compound interest CSBs may be exchanged at any time before maturity for the same denomination in regular interest CSBs of the same series. Payment of interest as well as compound interest CPBs may be exchanged for the same denomination in regular interest bonds of the same series plus payment of earned interest. Prior to 10 months of their issue date, regular interest CSBs can be exchanged for compound interest CSBs of the same series; regular interest CPBs may also be exchanged for the same denomination in compound interest CPBs of the same series.

The ownership of bonds can be transferred in certain situations, such as:

• Name change due to divorce, marriage, adoption and legal name change.
• To a beneficiary due to the death of the registered owner.
• If the registered owner has a spouse, or the bonds are owned/held by spouses, in the event of divorce; they can also be   stipulated in the written separation agreement in a form that is acceptable to the Bank of Canada.
• If transferred to the Canada Retirement Savings Plan and/or to the Canada Retirement Plan.

Additional names may be added as co-owner with the right of survivorship; the Bank of Canada must be notified via completion of the prescribed forms. Be advised that the term 'surviving co-owner' is not valid or applicable in Quebec; transferring ownership must apply to specific provincial laws.

Canada Savings Bonds may be redeemed by the lawful owner at any time. This can be accomplished by contacting any authorized sales agent in Canada; proper identification must be presented. CPBs may be redeemed either on the annual anniversary of the issue date or within 30 days afterwards. If the CPB is cashed in within the 30 day period no interest will be earned for the following period of the anniversary date. CPBs may be redeemed at other times under the following circumstances:

• Death of the lawful owner.
• Court order.
• Redemption proceeds are required by the lawful owner for the purposes of:
    To avoid bankruptcy.
    To be used to purchase a home using the Home Buyer’s Plan.
    To be used in furtherance of pursuing education via the Lifelong Learning Plan.

If bonds are redeemed within the first 3 months after their issue date, no interest is earned on them. As well, no interest is earned on bonds for the calendar month in which they are redeemed.

Bonds may only be purchased with Canadian currency and can only be owned by legal Canadian residents. More detailed information can be found at http://www.csb.gc.ca/eng/bonds_cpb.asp

The final installment in this 3 part series will focus on the Canadian Pension Plan Survivor Benefits. These benefits are paid to a deceased contributor's estate, surviving spouse or common-law partner and dependent children. There are three types of benefits:

• The death benefit. This is a one-time payment to, or on behalf of, the estate of the deceased CPP contributor;
• The survivor's pension. This is a monthly pension paid to the surviving spouse/common-law partner of the deceased contributor.
• The children's benefit. This is a monthly benefit paid for dependent children of the deceased contributor.

It is very important that these benefits be applied for; if they haven't been applied for you may lose benefits that are you are entitled to. In order for your survivors to be entitled to benefits there is a minimum contributory requirement of at least 3 years. If your Canada Pension Plan "contributory period" is longer than nine years, you must have contributed in:

• one third of the calendar years in your contributory period, or
• 10 calendar years, whichever is less

The Canadian Pension Plan death benefit

This is a one-time, lump-sum payment made to the estate of the deceased contributor. If there is no estate, then eligibility for this payment are as follows:

1. Person who is responsible for the funeral expenses.
2. The surviving spouse, common-law partner or next of kin may be eligible, in that order.

The amount of the death benefit will depend on how much and how long the deceased person contributed into the Canadian Pension Plan. The dollar amount is calculated by what the retirement pension would have been if the deceased had been 65 when death occurred; the benefit is equal to 6 months of this pension, up to a maximum of $2500.

The Canadian Pension Plan survivor's pension

The surviving legal spouse or common-law partner of a deceased contributor to the Canadian Pension Plan qualifies for this benefit. A person who is still a legal spouse but is separated at time of death may still be eligible if there is no current common-law partner. The amount the surviving spouse will receive depends on:

• Whether or not the spouse/common-law partner is also receiving a Canadian Pension Plan disability or retirement pension.
• How much, and how long the contributor paid into the plan.
• The age of the spouse/common-law partner when the contributor died.

CPP will first calculate how much the contributor's retirement pension is, or would have been, if he/she had been 65 when they died. A further calculation is then done based on the survivor's age at the time of the contributor's death. If the surviving spouse is:

• Aged 65 and over they will receive 60% of the contributor's retirement pension, if they are not receiving any other Canadian Pension Plan benefits.
• Aged 46-64, or under age 45 and disabled, or raising a dependent child, they will receive a flat rate plus 37.5% of the contributor's pension if they are not receiving any other Canadian Pension Plan benefits.
• Under the age of 45 and not disabled and not raising a dependent child, they will receive as above, but minus 1/120 for each month the spouse/common-law partner is under the age of 45 at the time of the contributor's death.
• Under the age of 35 and not disabled and not raising a dependent child, they will not be paid until they reach the age of 65, or become disabled.

The Canadian Pension Plan children's benefit

If a child has lost at least one parent who was a Canadian Pension Plan contributor, they may qualify for a benefit, provided that the deceased parent has met the contributory requirements. This benefit is paid as a flat rate that will be adjusted annually. If both parents are deceased and/or disabled and paid into the Canadian Pension Plan for the minimum amount of years, the child may qualify for 2 benefits. For children under the age of 18 this benefit is generally paid to the person that the child is living with. For children 18 years of age and older who are attending school fulltime (this includes college and university) the benefit will be directly paid to the child upon his/her application.

The Canada Pension Plan (CPP) is designed to provide basic benefits for contributors who retire or who become disabled. It is a taxable monthly benefit is paid to those who have contributed to the plan; it is based on how much and how long a person contributed to the plan as well as the age of retirement. Its function is to replace approximately 25% of the earning's of which the person's contributions are based.

Canadian Pension Plan offers 3 kinds of benefits:

• Retirement pension
• Disability benefits for contributors with a disability and their dependent children
• Survivor benefits which include the death benefit, the survivor’s pension and the children’s benefit

Retirement Pension

Qualification for CPP benefits requires at least one valid contribution to the Plan as well as:

• The applicant is at least 65 or
• The applicant is between 60 and 64 and meets the earning requirements

If the applicant is between the ages of 60 and 64 they must do one of the following in order to qualify for benefits:

• Stop working or
• Earn less than the specified amount ($884.58 for the 2008 year) the month preceding and the month following the month your pension begins.

Once pension benefits are received the applicant can work on an unlimited basis, however no more contributions to CPP will be eligible.

The age in which a person decides to take their Canadian Pension Plan determines the amount they will receive. The pension usually begins the month after the contributor turns 65. If you choose to receive this pension earlier than 65, the monthly payment will be smaller, if you choose to receive this pension later than 65 up to the age of 70 the monthly payment will be larger. The amount is adjusted 0.5% for each month before or after your 65th birthday from the time you begin to receive your benefits; this adjustment is permanent so if you choose to apply for your pension early the payments will not increase when you turn 65.

Several factors to consider regarding when to take your retirement pension are:

• Whether or not you are still working and contributing to the Plan
• The length of time in which you have made contributions
• How much you have earned (which may affect how much you’ve contributed)
• How much other retirement income you have
• The type of retirement you plan on having
• Your health

It is possible to get an estimate of your retirement pension at the CPP website. This can help you determine when to apply for retirement benefits, as well as give you an idea of how much you will receive should you apply for your benefits. If you decide to retire, it's best to apply for your Canadian Pension Plan benefits at least 6 months in advance; delay in application may result in lost benefits.

If you apply for your Canadian Pension Plan benefits after the age of 60, but before the age of 65 your pension starts at the latest of these following times:

• the month you specify on your application
• the month you stop working
• the month following your 60th birthday
• when your earnings are less than the allowable maximum pension payment for 2 months in a row

If you apply to begin receiving your benefits before you turn 65 or later you will begin to receive your benefits:

• the month of your 65th birthday
• the month you have specified on your application
• the 11th month prior to the month the CPP receives your application

Disability Benefits

The Canadian Pension Plan Disability Benefits provides a monthly benefit that is taxable to contributors who are disabled and to their dependent children. This benefit includes a fixed amount that everyone receives plus an additional amount that is based on your Canadian Pension Plan contributions during your entire working career; there is a maximum that can be received. Children under the age of 18 as well as children aged 18-25 who are attending school full time also receive a benefit (in 2008 the amount is $208.77); children can only receive this benefit if at least one parent is receiving the CPP disability benefit.

In order to qualify for this disability benefit the applicant must:

• be under 65
• have earned a specified minimum amount and contributed to CPP while working for a minimum amount of years
• have a severe and prolonged disability as defined by CPP legislation

The current legislation defines 'disability' as a physical and/or mental condition that is 'severe and prolonged' that regularly stops the applicant from being able to do any type of work. This relates to full-time, part-time as well as seasonal work; as well the applicant's disability is a long-term condition or is likely to result in death.

If the applicant has not contributed for enough years they may still qualify if:

• they have delayed applying and had enough years of contribution when they first became disabled and have been continuously disabled since then but now do not have enough contributions
• the applicant's CPP contributions were stopped/reduced due to raising children under the age of 7
• the applicant has obtained enough CPP credits from a former spouse/common-law partner through the credit sharing to make them eligible
• the applicant worked in another country in which Canada has a social security agreement and that when added to the CPP contributions equals the minimum requirement
• the applicant was medically incapable of applying

If a person is receiving Canadian Pension Plan disability benefits they will automatically convert into a retirement pension at the age of 65. There is no new application needed; however the retirement pension is usually lower than the disability benefit; applying for OAS benefits at this time is recommended. If the applicant is receiving retirement benefits when their disability benefits is approved CPP will automatically switch the applicant to disability benefits if it is clear that the disability started before the retirement pension began.

The next blog will address the Canada Pension Plan Survivor Benefits and will be posted in the next 2 weeks. For more information regarding disability insurance you can also refer to the information here. You can also visit the Canadian Pension Plan website for more detailed information.

Almost every senior in Canada will apply for their pension and benefits through Canada's Public Pensions. Basic financial assistance is also available to survivors and those who are too disabled too work, as well as their children through these programs. Canada's Public Pensions are delivered through the Old Age Security (OAS) and Canada Pension Plan (CPP). Having an understanding of the different programs as well as rules and regulations can help to determine what you are eligible for, and what will be required in the future.

Old Age Security Program

This is a monthly benefit that most Canadians are eligible for if they are 65 years of age or over and meet the residency requirements. Employment status and history are not factors that determine eligibility. Benefits paid out are subject to federal and provincial taxes; those with higher income will repay part or all of their benefits through this taxation system. Eligibility is determined solely by being 65, residing in Canada for at least 10 years once the age of 18 was reached, and:

• Being a Canadian citizen or legal resident of Canadian as of the day before the approval of the application or;
• If no longer living in Canada, having been a Canadian citizen/legal resident as of the day before they stopped living in Canada.

The amount of benefits received is determined by the length of residency in Canada. Any person who has lived in Canada for a total of at least 40 years after the age of 18 may qualify for full benefits. For those who haven't lived in Canada for at least 40 years since the age of 18, they may still be eligible for a full pension if they were 25 years of age or over on July 1, 1977 as well as:

• Was residing in Canada on July 1, 1977 or
• Was residing in Canada before July 1, 1977 after reaching 18 or
• Was in possession of a valid immigration visa on July 1, 1977

In these cases, the person must have lived in Canada for the 10 years immediately prior the approval of the OAS application. Absences during this 10 year period may be offset if, after reaching age 18, the applicant lived in Canada before these 10 years for a time period sufficient to total three times the length of absence, as well as resided in Canada for at least one year before the application’s approval.

For those whose absence from Canada was due to working abroad for a Canadian employer, i.e. armed forces, banks, this time can be counted as residency. Qualification is based on returning to Canada within 6 months of termination of employment or having turned 65 while still employed. Proof of employment as well as proof of physically returning to Canada must be provided. This provision may also apply to spouses and dependents and Canadians who have been working abroad for international organizations.
For Canadians who do not meet the criteria for a full OAS, they may qualify for a partial pension. This is calculated at the rate of 1/40 of the full monthly pension for each full year lived in Canada after the age of 18. This amount cannot be increased as a result of added years of residence in Canada once it has been approved. However, late applicants for OAS may be eligible to receive retroactive payments for up to 11 months plus the month in which the application was received if all conditions of eligibility have been met. If clients cancel their OAS benefits and later wish to have them reinstated, they are not entitled to any retroactive payments.

Guaranteed Income Supplement

The GIS is intended for Canadians who are receiving a basic, partial or full OAS pension and have little and/or no other income. These supplemental payments may start in the same month as the OAS payments, but must be re-applied for every year or by filing an income tax return by April 30. As this supplement is based on income, it will increase or decrease yearly depending on any changes in reported income. Unlike the OAS, the GIS is not subject to income tax. This supplement is not payable outside of Canada for more than 6 months, regardless of previous residential history. Applicants for the GIS must be receiving an OAS pension; there are certain income limits for the applicant as well as spouse/common-law partner. Sponsored immigrants from countries that Canada has agreements with are not eligible for GIS during their sponsorship period (10 year maximum) unless:

• Has resided in Canada for a minimum of 10 years since turning the age of 18 or
• Has resided in Canada as either a Canadian citizen or a permanent resident before or on March 6, 1996 and is eligible for benefits January 1, 2001 or earlier or
• Has been receiving OAS benefits for the month of March 1996 or earlier

The amount of the supplement is based on marital status as well as income. Any other income that the person is receiving i.e. foreign pension, interest, dividends, rental income, wages, worker's compensation payments, etc will be calculated to determine eligibility and/or amount of the benefit. This also applies to any income brought into the family by a spouse/common-law spouse. Income from the previous year is generally used to calculate the benefit for the current year that runs from the current July to the June of the following year. In cases where the applicant has retired and/or incurred loss of pension income an estimate for the current year can be substituted for the income for the preceding year.

The GIS is paid out in 2 basic payment rates: Single (includes widowed, divorced and/or separated people) and Married (where the spouse/common-law spouse doesn't receive either the basic OAS pension or the allowance). Although the supplement rate is higher for single people, each spouse/partner is entitled to benefits; the combined benefits therefore are usually higher than that of a single person. The maximum monthly benefit for a single person will be reduced $1.00 for every $2.00 of other monthly income. If  both spouses/partners are receiving the OAS pension, the monthly payment will be reduced $1.00 for every $4.00 of other monthly income. For a person who is receiving a partial OAS pension, the supplement may be increased by the difference of the partial pension and the full pension. If a spouse is a pensioner but their partner is not receiving either the OAS pension of the Allowance, the pensioner can apply for the Singles rate of the GIS and the supplement will be reduced by only $1.00 for every $4.00 of the combined monthly income. The first $1.00 reduction will be made only when the combined yearly income of both people has reached 12 times the basic OAS pension plus $48.00.

Allowance and Survivor's Allowance

This allowance is paid monthly and includes an allowance for those whose spouse/common-law partner has died. This allowance is designed to help those who are facing financial troubles; i.e. the surviving member of the relationship as well as those couples living on the pension of only one spouse. This allowance must be reapplied for annually and are not considered as income for tax purposes. For people living outside of Canada, this allowance cannot be paid out for more than 6 months, regardless of how long the person initially resided in Canada. The Allowance is paid to the spouse/common-law partner of a OAS pensioner, or to another qualified survivor. The person applying for the Allowance must be between the ages of 60-64 and have been living in Canada for at least 10 years since the age of 18. The applicant must have been a Canadian citizen or legal resident of Canada on the day before the application's approval. To qualify for the Allowance, the annual income of the survivor or the combined yearly income of the couple cannot exceed certain financial limits; these are established quarterly. The Allowance will be discontinued once the recipient becomes eligible for their OAS pension at 65, leaves Canada for a minimum of 6 months, or dies. For couples who receive the Allowance, payments will be discontinued if the pensioner spouse/partner ceases to meet the eligibility requirements for the Guaranteed Income Supplement, or if the couple separates/divorces. The Allowance will also stop if a survivor either remarries or lives in a common-law relationship for a period exceeding 12 months.

A sponsored spouse/common-law partner of an OAS recipient or survivor between 60 and 64 with less than 10 years of residence in Canada after reaching 18 is not eligible for the Allowance for the period of their sponsorship (up to a 10 year maximum), unless:

• Was receiving a pension in or before March 1996 or,
• Was residing or had resided in Canada as a Canadian citizen or permanent resident before March 7, 1996 and will be receiving a pension in or before January 2001

This is an income-tested benefit; the maximum payable amount to the spouse/common-law partner of a pensioner is equal to the combined full OAS pension and the maximum GIS at the married rate. The maximum amount for a person whose spouse/common-law partner has died will be somewhat higher. The maximum monthly Allowance is reduced $3.00 for every $4.00 of the beneficiary’s monthly income for a widowed spouse/common-law partner, or the couple’s combined monthly income. This will happen until the OAS-equivalent is reduced to zero; then for a couple the GIC equivalent of the Allowance portion and the pensioner’s GIC are reduced by $1.00 for every additional $4.00 of their combined monthly income. For survivors, the GIC equivalent portion is reduced $1.00 for every $2.00 of additional monthly income.

In the case of non-sponsored immigrants, the benefit will be prorated. Entitlement will be established at the rate of 1/10th of the benefit for year of residence in Canada after attaining the age of 18; this will be increased an additional 1/10th for every additional year of residence in Canada. This applies for people who haven’t resided in Canada for 10 year after turning 18 and:

• Had/was not residing in Canada as a Canadian citizen or permanent resident before March 7, 1996 or
• Was residing in Canada on or prior to that date as a Canadian citizen or permanent resident but will not be receiving a pension in or before January 2001

Information regarding the Canadian Pension Plan will be featured in the next blog as Part 2 of this article and will be posted in the next 2 weeks.

 Life insurance is an important part of every Canadian's financial security. Life insurance will ensure that your survivors are not encumbered with your debt, as well as providing them the finances that will enable them to live without your income. Therefore, it is imperative to make sure that any claim made against your life insurance policy does not get denied due to incorrect information on the application.

 Life insurance rates can be based on factors such as your health status, habits and/or lifestyle. Higher premiums will be applied to people who smoke, are grossly obese, and/or engage in "high risk" activities, i.e. skydiving, car racing, etc. These higher rates reflect the greater likelihood that you may die earlier than what is statistically determined for your age. Your life insurance application will ask questions regarding your health status in order to determine which rates you are eligible for.

Some people may be unclear about what is considered a "smoker". If, for instance, you only have a cigarette once every several months, you most likely do not consider yourself as a smoker. Your life insurance carrier, however, takes a very different view to this. You are considered a smoker if you have had any tobacco products within 12 months of applying for coverage. This also applies to smoking marijuana. Having the "odd" cigarette or smoking marijuana will constitute you as a smoker when you apply for your life insurance; thereby running the risk of having to pay a higher rate.

For those people who have the occasional cigarette, it may seem unfair that they have to pay the "smoker’s rate" and just identify as a non-smoker. However, "fudging" on your life insurance application means you risk potentially having your claim denied and/or delayed while it is under investigation. Even if smoking in no way contributed to the death, the failure to honestly answer the questions on the application may cause the carrier to conduct an investigation; it may also be grounds for the carrier to consider denying the claim.

Honesty is definitely the best policy when it comes to applying for insurance. This will ensure that should a claim be made it will be processed quickly and your beneficiaries will not have to experience any delays. If you are unsure about what health status you should use on your application, make an appointment and discuss these issues with your broker. Remember to discuss any and all activities that may be considered high risk in order to avoid confusion at a later date. Also remember to consult with your broker if your status changes, i.e. you have been tobacco free for a minimum of 12 months. Full disclosure on your application means that you and your family will have the security of knowing that you are insured, and that should something occur, your family will not be subjected to an unexpected delay while the claim is being processed.