Ottawa hands OSFI a competition mandate and caps surplus in individual pension plans
Canada’s 2026 federal budget, tabled in the House of Commons on November 5, sets out $142.1bn in new measures over five years and rewrites several rules governing registered pension plans, their administrators, and the regulator that supervises them.
The federal government projects a deficit of $62.3bn for 2026-27, $3bn below the April spring economic update, according to the budget.
Seven measures matter most to plan sponsors, administrators, and institutional investors.
1. A revocation tax for registered pension plans
Registered pension plans whose registration is revoked after 2026 will owe a special tax equal to 10 percent of the fair market value of their property immediately before revocation, which the Canada Revenue Agency (CRA) may waive or cancel.
The plan is then deemed to become a retirement compensation arrangement, with the remaining property deemed contributed and subject to a 50 percent refundable tax.
Ottawa books $148m from the registered pension plan measures across 2028-29 to 2030-31.
2. A hard cap on individual pension plan surplus
From January 1, 2028, an individual pension plan (IPP) whose assets exceed 200 percent of its pension liabilities becomes a revocable plan, with CRA required to issue a notice of intent at least 30 days before revoking.
Registered pension plans already trigger employer contribution holidays once assets pass 125 percent of liabilities.
The IPP definition also expands on January 1, 2027 to capture defined benefit plans whose members are all related to, or do not deal at arm’s length with someone related to, a participating employer.
PwC Canada notes transitional rules will apply to investments held before 2028 that become prohibited or non-qualified.
3. Lighter administration for federally regulated plans
The Pension Benefits Standards Act, 1985 and the Pooled Registered Pension Plans Act would be amended to make electronic communications easier to use and to remove some required communications to spouses and common-law partners.
Certain pooled registered pension plan members could set their own contribution rates.
A review of both sets of regulations is planned.
4. CRA can confirm a member’s death to administrators
The Income Tax Act would permit CRA to confirm to a registered pension plan administrator that a member is deceased, a measure costed at $30m.
Administrators are in some cases unable to locate former employees entitled to benefits, and the agency currently cannot confirm a death even where it holds that information, the budget’s tax measures annex states.
5. OSFI gets a secondary competition objective
Amendments to the Office of the Superintendent of Financial Institutions Act would add a secondary competition objective so that proportionality, compliance burden, and market impacts shape how OSFI regulates.
A separate amendment strengthens the administrative monetary penalties regime and gives OSFI’s actuarial services a statutory basis, including cost recovery.
OSFI supervises federally regulated financial institutions and pension plans.
Celyeste Power, president and chief executive officer of Insurance Bureau of Canada, said in a statement the change “will help foster a regulatory environment that maintains financial stability while ensuring OSFI’s decisions give consideration to proportionality, compliance burden and market impacts.”
The Canadian Bankers Association also backed the expanded mandate, The Globe and Mail reported.
6. RRSP-for-life opens a pension standards question
Ottawa intends to merge the tax rules for registered retirement savings plans and registered retirement income funds, removing conversion at age 71 while keeping minimum withdrawals from age 72.
Because funds transferred out of a pension plan are locked in and must sit in prescribed vehicles, the budget says the merger could require consequential changes to the Pension Benefits Standards Regulations, 1985 and similar provincial rules.
Submissions close January 8, 2027.
7. Old Age Security growth and benefits delivery
Old Age Security payments are projected at $89.4bn in 2026-27, up 8.0 percent, reaching $109.5bn by 2030-31, driven by recipient numbers and consumer price inflation averaging 2.2 percent from 2026 to 2030.
Paul Kershaw, a University of British Columbia professor and founder of the Generation Squeeze think tank, told BNN Bloomberg the “affordability investments actually are quite striking for the older loved ones in our lives, but markedly more modest for their kids and grandchildren.”
Employment and Social Development Canada receives $705.3m over six years for the final phase of Benefits Delivery Modernisation, including migrating the Canada Pension Plan onto a new platform.
On group benefits, qualifying massage therapy services become GST/HST exempt for supplies made after November 5, and the Canada Caregiver Credit becomes fully refundable for 2027.
The budget provides $1.2bn in 2027-28 to extend federal agreements with provinces and territories for mental health and addictions services and home and community care, The Canadian Press reported.
Plan sponsors are weighing these changes against record funded positions that consultants say rest on drivers that could reverse.
