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Before making a major financial decision you
should consult a qualified professional.
There have been several revisions to the CPP
retirement pension. The changes do not
affect the benefits of anyone who was collecting the CPP
retirement benefits prior to 2012,
unless they did not reach the age of 65 before 2012, and
earning pensionable earnings after 2011. Those
collecting their pension prior to 2012 had to start contributing
again in 2012 if they were earning pensionable earnings, and had not yet
reached 65 years of age.
Election: From age 65 to 70, an employee can elect
to stop making further contributions to the CPP, by completing form CPT30
from CRA. Once the form is completed, a copy must be given to the employer, and the original sent to CRA.
The election would take effect on the first day of the month following the
month that the form is filed with the employer, so cannot be
backdated. The first day that
the form can be completed is the day that the employee turns 65, so CPP
contributions are still made for the birthday month.
Employers: See T4
slip information for correct completion of the T4 slip when a CPT 30
has been submitted.
Revocation: The election can be revoked
by completing form CPT30
but not until the following calendar year.
Individuals who are age 65 to 70, are not employees,
and only have self-employed earnings, can elect to not make contributions
to the CPP by completing Schedule 8
CPP Contributions and Overpayment and filing it with their tax return
after the year is complete. This election would take effect on the
first day of the month indicated on Schedule 8.
Individuals who have both employment and
self-employment earnings would file the CPT30 with their employer and
CRA, which is effective for both employment and self-employment
earnings. If they became employed in 2014 and filed a CPT30 at that
time, but want to opt out of CPP contributions on self-employment earnings prior
to becoming employed, (only if not a Quebec resident), they
would also complete Schedule 8 or Form
RC381 Inter-provincial calculation for CPP and QPP contributions and overpayments,
whichever applies, when they file their tax return for that year. To
be valid, an election that applies to 2014 must be filed on or before June
These changes were included in Bill
C-51, which received Royal Assent on December 15, 2009.
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. This is still true after 2011,
although the contributions made subsequent to starting the pension will
result in the receipt of post-retirement benefits (PRB).
Work Cessation Test - Removed
Before 2012, in order to qualify to collect the CPP retirement
pension before age 65, a person must have reduced earnings for the month prior to
collecting the pension, and the following month.
Starting in 2012 - the Work Cessation Test was removed. No reduction in earnings
has to take place in order
to collect the benefits prior to age 65.
General Low Earnings Drop-Out
If a person starts collecting CPP at age 60, the
contributory period is 42 years, and at age 65 would be 47 years.
However, adjustments are made to the contributory period and average
pensionable earnings by "dropping out" certain periods of low
income. This applies to periods where the person is on a CPP
disability pension, or when income is low or zero during child
raising years (the child-rearing dropout).
Before 2012, there was a general drop-out of 15% of the contributory years which
or nil for other reasons. For individuals who started their CPP at age
65, this removed almost 7 years of low or zero earnings from the
calculation. This increased the average earnings and
CPP retirement pension for every person.
Starting in 2012 - increase the general drop-out
16% in 2012, allowing a maximum drop-out of almost
17% in 2014, allowing a maximum drop-out of 8
This change also increases the average CPP
disability and survivor pensions, which are based on the retirement
CPP Contributions When Receiving Retirement Pension
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
Post-Retirement Benefit (PRB)
These contributions will result in a
post-retirement benefit (PRB), even for persons already receiving the maximum
Additional benefits would be earned at a maximum rate
of 1/40th of the maximum pension amount ($12,150 in 2013) 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).
This will affect those people collecting CPP
retirement pension prior to 2012, if they continue to earn pensionable
earnings after 2011.
Pension Adjustments for Early and Late CPP Take-Up
Early Take-Up of CPP Retirement Pension
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
Starting in 2012 the percentage amounts used to
reduce the early taken pensions are being gradually increased. The new
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.
Late Take-Up of CPP Retirement Pension
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
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.
Deductions allowed where
contributory period ends after age 65
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
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) 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 70 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.
Points to consider when deciding when to start
your CPP retirement benefits
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
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.