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CPP Retirement Pension

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Seniors -> CPP retirement pension

Canada Pension Plan (CPP) Retirement Pension

The Federal 2016 Budget announced that consultation will be started with Canadians regarding enhancement of the CPP retirement pension, with a view to making a decision before the end of 2016 about how it should be enhanced.  Consultations with Canadians will be started in the coming months.

On June 20, 2016, the federal Minister of Finance announced that an agreement in principle was reached to strengthen the CPP.  Measures agreed to, which would start January 1, 2019:

bulletIncrease income replacement from 1/4 to 1/3 of pensionable earnings
bulletCanadian with $50,000 in constant earnings throughout their working life would receive an annual pension of around $16,000 instead of the current $12,000
bulletIncrease the maximum amount of income subject to CPP by 14%, projected to be roughly $82,700 in 2025 (currently $54,900)
bulletMake the phase-in long and gradual over 7 years, to allow more time for businesses to adjust
bullet5 year contribution rate phase-in below the Yearly Maximum Pensionable Earnings (YMPE), followed by
bullet2 year phase-in of the upper earnings limit
bulletEnhance the federal Working Income Tax Benefit (WITB) to offset the impact of increased contributions on low-income workers
bulletProvide a tax deduction, instead of the current tax credit, for employee contributions associated with the enhanced portion of CPP

See Fact Sheet: What the Agreement in Principle Means for Canadians, released September 19, 2016.

The CPP retirement pension is considered taxable income.  The amount you receive is not affected by the amount of any other income.

You are eligible for a CPP retirement pension if:

bullet you have contributed to the plan, and
bullet you are 60 years of age or older

The CPP retirement pension, as mentioned above, can be obtained as early as age 60.  It can also be delayed to age 70.

When early pension is taken, the pension amount is reduced for each month that you start your pension before age 65.  Thus, if you start your pension at age 60, it will be less than if you start it at age 65.  Because you will be receiving the pension for an additional 5 years, and you cannot predict how long you will live, it is usually to your advantage to start it as early as possible.  However, if you have a pension plan which provides bridge benefits from age 60 to 65, you may be best to wait until age 65 because taking the pension at 60 could reduce the bridge benefits.  The changes in the CPP pension calculations for early take-up and late take-up also make it more attractive to wait.

Consideration must also be given to the effect of your CPP income on your Old Age Security (OAS) or Guaranteed Income Security (GIS) benefits.  Starting your CPP later means a higher income, which could increase your OAS clawback if you have high income, or reduce your eligibility for GIS if you have low income.

The amount of your CPP pension will depend on how many years you have contributed to the Plan, and how much you have contributed.

A person's CPP retirement pension is calculated as 25% of his average pensionable earnings during his contributory period.  The contributory period starts when he turns 18, or 1966, whichever is later.  The contributory period ends when he starts collecting the pension.

You can estimate how much your CPP retirement pension will be by referring to your Statement of Contributions, which is accessible online via Service Canada.  You can also request that the statement be mailed to you.  The table of current monthly average and maximum rates can be found on the Service Canada website.  You can use our CPP Retirement Pension Calculator to compare the pension you would receive at different starting dates.  The Quebec Pension Plan (QPP) equivalent to the statement of contributions is the Statement of Participation, which can also be accessed online, or can be mailed to you based on your online request.

You should apply for your CPP retirement pension about 6 months before you would like it to start.  You can apply up to a year before you would like it to start.  Service Canada indicates that it takes about 8 weeks to receive your first payment, from the time that they receive your application.

See also our article on the Child Rearing Drop-out Provision, which could increase your CPP retirement pension monthly benefits.

You cannot receive both a CPP retirement pension and a CPP disability benefit at the same time.  If you are under 65, have been receiving a CPP retirement pension for less than 15 months, and you are eligible for the disability benefit, you can request to have your retirement pension replaced by a disability benefit.

See our CPP Retirement Pension Calculator, which provides a comparison of the CPP pension you will receive, based on different starting dates.

See our article on the Canada Pension Plan Rules, which discusses old and new rules, and provides factors used to calculate benefits when CPP is taken early or late.  This article also provides information on the post-retirement benefit.

Information on the Service Canada website:

bullet CPP Disability Benefit
bulletCanada Pension Plan retirement pension
bulletQuarterly report of CPP and OAS monthly amounts and related figures
bulletService Canada Contact re Canada Pension Plan

Service Canada online services:

bulletCanadian Retirement Income Calculator - if your pensionable earnings are changing, use this calculator to determine your future CPP or QPP retirement income. It will also estimate your OAS.
bulletapply online for your CPP retirement pension - scroll down to the Apply Now icon, or
bulletdownload the application form and mail it in.
bulletCPP Statement of Contributions - view and print your statement, or request that it be mailed to you
bullet OAS or CPP recipients can view and update their personal information online
bulletOAS and CPP payment dates


bullet Canada Pension Plan and Regulations


Revised: September 20, 2016


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