Seniors -> CPP Retirement Pension
The Federal 2016 Budget announced changes to the Canada Pension Plan. Bill C-26 An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act received Royal Assent December 15, 2016. The Order in Council to bring the CPP enhancements in Bill C-26 into force was signed on March 2, 2017, according to the Department of Finance news release.
October 6, 2016: Notice of Ways and Means Motion and Explanatory Notes regarding CPP enhancements, with amendments coming into force on January 1, 2019.
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:
The CPP retirement pension, as mentioned above, can be obtained as early as age 60. It can also be delayed to age 70. The Federal 2019 Budget proposes to proactively (automatically) enroll CPP contributors who are 70 years old or older in 2020, but who have not yet applied to receive their pension. Some Canadians may prefer not to receive a CPP retirement pension, as it could reduce federal and provincial income-tested benefits, so the budget also proposes to extend the opt-out period from 6 months to a year.
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. Your CPP pension is not affected by where you live.
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.
Self-employed and filing a tax return more than 4 years late? See our article on this.
Normally, for residents of Canada, there is no tax deducted from payments of CPP retirement pension. However, you can request that tax be deducted, by visiting the My Service Canada Account (MSCA), or by completing the Request for Voluntary Federal Income Tax Deductions form (ISP 3520). If you previously requested voluntary tax deductions, you can also change or stop the deduction amount using one of these methods. These methods apply to Old Age Security (OAS) voluntary tax deductions as well, but there is another method to change tax deductions related to the OAS clawback.
Information on the Service Canada website:
Service Canada online services:
Revised: March 19, 2019
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