|16% in 2012, allowing a maximum drop-out of almost 7.5 years|
|17% in 2014, allowing a maximum drop-out of 8 years.|
This change also increases the average CPP disability and survivor pensions, which are based on the retirement benefit calculation.
Previously, CPP contributions were no longer paid once a person was receiving a CPP retirement pension, or once the person was 70, whichever was earlier.
Effective January 1, 2012 - CPP retirement benefit recipients are required to continue to make CPP contributions until age 65. Those age 65 to 70 are able to elect not to continue contributing to the CPP.
|The contributions made after collecting your CPP retirement pension will result in a post-retirement benefit (PRB), even for persons already receiving the maximum pension amounts.|
|Additional benefits would be earned at a maximum rate of 1/40th of the maximum pension amount ($14,445 in 2021) per year of additional contributions. The exact amount would depend on the earnings level of the contributor. The PRB will also be adjusted based on the age of the contributor, using the early and late CPP take-up factors (see below).|
|See the Service Canada Canadian Retirement Income Calculator, which includes an estimate of how much you will receive in post-retirement benefits|
This will also affect those people collecting CPP retirement pension prior to 2012, if they continue to earn pensionable earnings after 2011.
Before 2012, when the CPP retirement pension was taken early, it was reduced by 0.5% per month for each month that the pension was taken before the 65th birthday. The pension was reduced by 30% (5 years x 12 months x 0.5%) for a person who began collecting it at age 60.
Starting in 2012 the percentage amounts used to reduce the early taken pensions are being gradually increased. The new factors are:
This would result in the pension being reduced by 36% (60 months x 0.60%) for a person who begins collecting it at age 60 after 2015.
Before 2012, the late pension was increased by 0.5% per month for each month after the 65th birthday that the person waited to begin the pension, up to age 70. The pension was increased by 30% (5 years x 12 months x 0.5%) for a person who waited until age 70 to start collecting it.
Starting in 2011 the percentage amounts used to increase the late taken pensions were gradually increased. The new factors are:
|2013 and later years||0.70%|
This would result in the pension being increased by 42% (60 months x 0.70%) for a person who begins collecting it at age 70 after 2012.
The contributory period ends with the earliest of:
|the month preceding the month in which the contributor turns 70|
|the month in which the contributor dies, or|
|the month preceding the month in which the retirement pension commences.|
If a person delays the start of their pension past age 65, then s. 48(3) of the Canada Pension Plan allows a dropout of the number of months past age 65 from your contributory period (over 65 dropout). This is in addition to the low earnings dropout and any child rearing dropout that have already been applied.
This results in an additional dropout of an equal number of months of low pensionable earnings, from the total pensionable earnings. So, the maximum number of years of low earnings that can be dropped out increases from 8 (low earnings dropout - see above) to 13 (low earnings + over 65 dropouts).
Thus, delaying the pension to age 70 combined with low or no contributory earnings after age 65 won't reduce the CPP retirement pension, because these months can be dropped out. Working after age 65 with contributory earnings higher than your average contributory earnings should increase your pension, because you can drop out months prior to age 65 when you had lower than average contributory earnings.
Your CPP retirement pension can be cancelled up to 6 months after you start receiving it. You have to request this in writing, and you must pay back all of the CPP income you've received. See Canada Pension Plan - After You've Applied, on the Service Canada website.
For cancellation of CPP and OAS benefits on behalf of a deceased person, see Cancel Old Age Security and Canada Pension Plan Benefits on the Service Canada website.
|The changes in the benefit calculations make delaying the start of your pension more attractive than it used to be.|
|The CPP legislation could be changed again in the future, perhaps to increase the minimum age at which the pension can be taken.|
|Guaranteed Income Supplements (GIS) - If your income is low enough that you will be able to receive GIS, check to see if receiving higher CPP benefits by taking them later will affect your ability to collect GIS.|
|Old Age Security (OAS) clawback - Your OAS benefits are clawed back once you reach a certain income level, so check to see if delaying your CPP benefits will put you into the clawback income level.|
Calculation of your Canada Pension Plan (CPP) benefit - DR Pensions Consulting. It was Doug Runchey, the owner of DR Pensions Consulting, who discovered that the CPP retirement pension related to the enhanced CPP is not being paid.
CPP Retirement Pension Calculator, which provides a comparison of the CPP pension you will receive, based on different starting dates.
Self-employed and filing a tax return more than 4 years late? This affects your CPP.
Service Canada Canadian Retirement Income Calculator -Use this if your earnings are changing significantly before you start collecting your CPP pension.
Canada Revenue Agency - Changes to the CPP Rules - Employers - includes a video presentation of the December 2011 webinar presented by CRA.
Tax Tip: You don't know how long you will live, so we still recommend taking your CPP retirement pension at age 60 - unless it will reduce the bridge benefits from your pension plan!
Revised: October 24, 2021
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