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The good news is that private and government pensions, under the Ontario Pensions act, cannot be garnisheed by a normal creditor, such as a credit card company. You can only make garnishments under the Ontario Wages Act, and pensions aren’t work wages.
The bad news is, there are exceptions to the above rule. For example, if you receive Old Age Security (OAS) and Canada Pension Plan (CPP) benefits and you owe back taxes, the Canada Revenue Agency (CRA) has broad powers that enable it to collect the tax arrears from your pension, just as it can from your tax return.
The CRA doesn’t actually take the money from you. You simply don’t receive the portion owed. It’s a case of the government giving with one hand while taking with the other. They can simply send a letter to the Income Security Programs office, or to your bank, specifying how much money will be seized on behalf of the CRA.
Furthermore, while the Ontario Wages Act only allows creditors to garnishee up to 20% of a someone’s wages or 50% for child support, the CRA can grab as big a chunk as it deems necessary. And unlike a wage garnishment by a creditor, the government does not have to go to court and get a judgment. They just have to decide to do it and then it’s done. They wield a big stick.
Once a pension cheque is deposited into your bank account, it is just money and can be subject to seizure by a creditor who has obtained a judgment against you. But your pension funds may be at even greater risk from the bank itself if you owe them money for, say, credit card purchases, line of credit or car loan debt. A standard banking agreement allows the financial institution to seize pension funds and any money in your account to recover what they are owed.
Your pension can also put at risk if you are behind in your support and maintenance payments for your children and/or spouse. Through the Family Responsibility Office, up to 50% of your pension can be seized to pay these arrears.
If you have received an overpayment of OAS or CPP benefits from Income Security Programs, the government can deduct the money owed from your pension payments, even if the mistake was theirs.
If you receive OAS benefits, usually you won’t be eligible to receive social assistance benefits from Ontario Works or the Ontario Disability Support Program. But if you aren’t receiving pension benefits yet – because of an uncompleted pension application or because your eligibility isn’t yet decided – you could receive social assistance. However, you also might have to reimburse the money received from social assistance once you your pension benefits start arriving.
At Doyle Salewski, we can help you solve your debt and budgeting crises, using our proven expertise and experience to achieve financial freedom and peace of mind. Contact us today for a free consultation, either through our Ottawa headquarters, 613-237-5555, or our fully bilingual Gatineau office, 819-776-7777. Email: [email protected].