Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is a benefit plan for retired workers to protect them and their family against the loss of income due to retirement, disability and death. The Plan is administered by the federal Department of Employment and Social Development Canada through Service Canada.

Types of CPP benefits

There are four kinds of CPP benefits:

1. Disability benefits: available to people who have made contributions to the CPP, and whose disability prevents them from working at any job on a regular basis (includes benefits for disabled contributors and benefits for their dependent children).
2. Retirement pension: available to individuals who have worked, have made at least one payment to the CPP, and are at least 60 years old.
3. Survivor benefits: paid to a deceased contributor’s estate, surviving spouse or common-law partner and dependent children. Survivor benefits include a death benefit, the survivor’s pension and the children’s benefit.
4. Post-Retirement benefits (PRB): available to individuals who continue to work while receiving CPP and are under the age of 70. These contributions go towards post-retirement benefits, increasing retirement income.

Making sure you receive all the benefits and pensions you are entitled to as a senior can be difficult. To get help, ask a lawyer now.

Who can receive Canada Pension Plan benefits?

Workers who have contributed to the CPP are eligible for benefits when they retire. The amount of benefits that someone is eligible for will depend on how long the person or their spouse worked and paid into the plan. Workers pay a portion of their wages into the CPP fund until they retire. The amount an individual pays is based on their salary. If they are self-employed, it is based on their net business income (after expenses).

Generally, the following workers are entitled to receive CPP benefits:

• employees making contributions to the CPP, whether they are just starting their career or are planning to retire soon;
• self-employed people who contribute to the CPP;
• people between the ages of 60 and 70 who work while receiving their CPP retirement pension.

At what age can workers collect Canada Pension Plan benefits?

CPP benefits are usually paid to workers when they retire at the age of 65. If a worker retires earlier, between the ages of 60 and 65, they may still be eligible for benefits, although the benefit amount may be reduced. If the worker dies, the benefits may be paid to the worker’s spouse. If the worker becomes disabled and can no longer work, the CPP may begin paying benefits before the worker turns 65.

Rules that apply:

1. The monthly CPP retirement pension amount will increase by a higher percentage if taken after age 65.
2. The monthly CPP retirement pension amount will decrease by a larger percentage if taken before age 65.
3. A longer period of low earnings will be automatically dropped from the calculation of the CPP retirement pension.
4. Contributors will be able to receive their CPP retirement pension without any work interruption.
5. If you are under 65 and you work while receiving your CPP retirement pension, you and your employer will have to continue making CPP contributions. These contributions will increase your CPP benefits.
6. If you are between the ages of 65 and 70 and you work while receiving your CPP retirement pension, you can choose to continue making CPP contributions. These contributions will increase your CPP benefits.

It is important to note that if a person started receiving a CPP retirement pension before December 31, 2010, and remained out of the work force, they will not be affected by the above rules.

You must apply for benefits, they are not automatic. To start receiving benefits when you retire, you will need to fill out an application form available online, or from a Service Canada Centre in your area. You can also request that a form be mailed to you. To complete an application in person you will need to provide a proof of age document, such as a birth certificate. Visit canada.ca for more information.

Enhancements to the CPP

In July 2016, the federal government, and every province except Quebec, reached an agreement, in principle, to enhance the CPP. Enhancements to the CPP are intended to augment the current CPP along with an individual’s personal retirement savings, so that people would have a sufficient source of income during retirement.

The proposed enhancements are now in effect.

As of January 2019:

• The CPP survivor’s pension has increased. The increase received will depend on how much and for how long the deceased spouse or common-law partner contributed to the enhanced CPP (individuals who were under 35 when their spouse or common-law partner died, are not yet 65 and are not currently receiving the CPP survivor’s pension, may not be eligible to receive it).
• Employees’ contributions to the enhanced portion of the CPP are tax-deductible. Employees will continue to receive the current tax credit for existing CPP contributions. This will reduce income taxes for middle-income workers.
• The CPP disability pension amount has increased. The increase you receive will depend on how much and for how long you contribute to the enhanced CPP. If you began receiving your CPP disability pension before 2019, it will not be affected by the enhancement.

Changes gradually being phased in, beginning January 2019:

• The CPP is growing to replace one third (33%) of the average work earnings received after 2019 (up from 25%).
• The maximum limit used to determine average work earnings is gradually increasing by 14% by the year 2025. This means middle-income workers are eligible to earn CPP benefits on a larger portion of their income.
• Both employer and employee contribution amounts are increasing. For earnings up-to the Yearly Maximum Pensionable Earning (YMPE) amount, employee and employer contributions will increase by one percentage point each, from 4.95% to 5.95%, beginning in 2019 through to 2023. There will be new contribution rates from 2024 to 2025 based on new yearly maximum earning amounts.

Effective January 1, 2024

“the government is introducing a second earnings ceiling known as the Year’s Additional Maximum Pensionable Earnings (YAMPE). People who have income above the first earnings ceiling will contribute an additional percentage of the income they earn above the first earnings ceiling up to the second earnings ceiling. This additional CPP contribution is part of the CPP enhancement known as second additional CPP contributions (CPP2).”

For more information regarding the enhancements to the CPP, including contribution limits and contribution payment amounts, visit canada.ca.

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Making sure you receive all the benefits and pensions you are entitled to as a senior can be difficult. To get help, ask a lawyer now.

								
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