In Canada, that boils down to two primary sources: savings (i.e. RRSPs, company pensions) and government benefits like the Canada Pension Plan (CPP). What’s great about the CPP is that almost everyone working in Canada can contribute to it and collect payments starting at age 60. Read on for the full scoop on the CPP, including eligibility requirements, maximum monthly amounts, payment dates, and how to apply.

What is the Canada Pension Plan (CPP)?

Enacted in 1965, the Canada Pension Plan, or CPP, is a contributory social insurance program that provides a monthly, taxable benefit when you retire. It’s one of two public retirement systems in Canada, with the other one being Old Age Security (OAS). Low-income seniors can also obtain additional support for their retirement plans from the Guaranteed Income Supplement (GIS)

Who qualifies for the CPP? 

To qualify for the CPP, you must be at least 60 years of age and have made at least one valid contribution to the CPP. Valid contributions come from working in Canada or receiving credits from a former spouse or common-law partner at the end of a relationship. 

If you live in Quebec, you’ll be eligible for the Quebec Pension Plan (QPP) as the provincial government has opted out of the CPP. 

How much can I get from the CPP?

In 2021, the maximum monthly amount you may receive from the CPP is $1,203.75. The average monthly amount is $689.17. CPP amounts are different for everyone as they are based on your contributions, average annual earnings, and the age at which you start your pension. Use the Canadian Retirement Income Calculator to get an estimate of your retirement benefits.

When you start collecting the CPP is up to you. The standard age is 65 but you can start receiving it as early as age 60 or as late as 70. Keep in mind your monthly amount will be smaller if you choose to receive your pension earlier and larger if you decide to start later. Don’t wait too long though – you’re entitled to your maximum amount when you reach age 70 so there’s no benefit to starting the CPP after that.

How age impacts your CPP amount

Before age 65: Payments decrease by 0.6% each month (7.2% yearly), up to a maximum reduction of 36% if you start at age 60.

After age 65: Payments increase by 0.7% each month (8.4% yearly), up to a maximum increase of 42% if you start at age 70 or later.

What is the CPP Enhancement?

In 2019, the Government of Canada introduced the CPP Enhancement, which offers higher benefits in exchange for higher contributions. From 2019 to 2023, the employee contribution rate will gradually increase from 4.95% to 5.95% on earnings between $3,500 and the original earnings limit.

Contributors will also get the opportunity to invest an additional portion of their earnings to the CPP beginning in 2024. If you make these enhanced contributions for 40 years, it will increase your maximum CPP retirement pension by up to 50%.

Can I work and collect the CPP at the same time?

Yes, you can work and get the CPP simultaneously without reducing your pension amount. In fact, you could even increase it with the CPP post-retirement benefit. The benefit allows you to continue making CPP contributions if you work while receiving your CPP retirement pension. Each year you contribute to the CPP during this period will result in a post-retirement benefit that increases your retirement income.

The maximum monthly amount for this benefit in 2021 is $30.09. You may choose to stop post-retirement contributions at age 65. CPP contributions stop at age 70, even if you’re still employed.

What other CPP benefits are available?

Besides the CPP post-retirement benefit, other CPP benefits include:

Disability

  • CPP Disability (CPPD): The CPPD is for individuals who have contributed to the CPP but can no longer work regularly due to a disability. You can’t receive the CPPD and the CPP at the same time. As a result, the Government of Canada will automatically convert your CPPD pension to a CPP retirement pension when you turn age 65. The maximum monthly amount is $1,413.66.
  • CPP Post-retirement Disability Benefit: You may qualify for this benefit if you collect the CPP pension, are under the age of 65, have a severe or prolonged disability, and have made enough CPP contributions. The benefit is added to your monthly CPP payment and offers a maximum monthly amount of $510.85.
  • Children’s Benefit: Your dependent children can obtain a monthly benefit of $257.58 if you’re receiving a CPP disability benefit.

After a death

  • CPP Survivor’s Pension: This pension pays up to $722.25 monthly to the deceased CPP contributor's legal spouse or common-law partner.
  • Children’s Benefit: Dependent children of deceased CPP contributors can get a monthly benefit of up to $257.58.
  • Death Benefit: If you’re a CPP contributor and pass away, the Death Benefit will provide a one-time payment of up to $2500 to your estate.

What are the CPP payment dates for 2021?

CPP payments will be sent by direct deposit on the following dates in 2021:

  • January 27
  • February 24
  • March 29
  • April 28
  • May 27
  • June 28
  • July 28
  • August 27
  • September 28
  • October 27
  • November 26
  • December 22

Do I need to apply for the CPP?

Yes, you need to apply for the CPP as payments are not automatic once you reach retirement age. Applications can be done online through My Service Canada, sent by mail, or dropped off at a Service Canada office. 

You must submit a paper application if you:

  • live outside Canada
  • have an authorized third party that manages your CPP account
  • are receiving, have ever received, or have been denied a CPP benefit (i.e. disability pension, survivor’s pension, children’s benefit)

The application will ask you when you want to start your pension, so it’s important to have a clear picture of your personal circumstances beforehand. Your decision should be based on key factors such as your health, finances, and retirement plans. For example, you may choose to begin the CPP later in exchange for larger payments down the road if you expect to live long and have access to other income sources. On the other hand, you may want your pension before age 65 if you want to get rid of debt or have little or no other income.

If you apply after turning 65, you may request retroactive payments for up to 12 months (11 months plus the month you apply). No retroactive payments are given if you take out the CPP before age 65.

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