Canadian Pension Plan Retirement Pension
What is the Canadian Pension Plan (CPP) Retirement Pension?
A CPP retirement pension is a monthly benefit paid to individuals who contributed to the Canada Pension Plan.
The CPP pension was designed to replace approximately 25% of a person’s earnings from employment, up to a maximum amount. For 2018, the maximum monthly CPP Retirement Pension is $1,134.17 per month ($13,610 annually) if you begin receipt of the pension at age 65. It is important to note that the average CPP retirement pension is much less than the maximum. The average CPP retirement pension in the month of October 2016 was $641.63.
How do I qualify for the CPP Retirement Pension?
To qualify, you must have made at least one valid contribution (payment) to the Plan. The normal retirement age is 65 years but you can begin collecting CPP as early as age 60 or as late as age 70. If you begin collecting CPP earlier than age 65 your pension will be reduced; if you begin collecting CPP later than age 65 your pension will be increased.
How do I apply?
You must apply for the CPP Retirement pension by completing the application available from Service Canada. You can apply online by visiting www.canada.ca, downloading and printing an application from the website or by calling Service Canada at 1-800-277-9914 to get an application. You should apply approximately 6 months before you intend to receive the benefits.
If you are already receiving a CPP disability benefit, you will still need to apply for the CPP Retirement benefit when you turn 65.
How is my CPP Retirement Pension calculated?
Your CPP retirement pension is based on how much, and for how long you contributed to the CPP, or to both the CPP and the Quebec Pension Plan (QPP).
The age at which you choose to begin receiving CPP also affects the amount you receive.
The CPP protects your pension by making certain adjustments before calculating your pension. Some low-earning periods during your career (e.g. child rearing), may be “dropped out,” so they do not reduce the amount of your pension. Review the "drop out" provisions on Service Canada's website or contact them to see if you are eligible.
How does my age affect the amount of my pension?
Although your CPP retirement pension usually starts the month after your 65th birthday, you can begin receiving your CPP retirement pension any time after age 60.
Your monthly payment is smaller if you begin receiving it before age 65 and larger if you take it after. The CPP offers you flexibility with respect to the age you begin collecting it.
When does my pension begin?
From Age 60 to 65
You can start receiving your retirement pension the month after you turn age 60, though it will be reduced. Your pension will commence the month after you turn 60 or your application is received whichever is later. If you choose to receive it early, the pension is reduced by up to 0.6% per month (7.2% per year). Therefore, if you begin to receive your pension at age 60 it will be reduced by up to 36%.
From Age 65
You can start receiving your pension the month after your 65th birthday (or at a later date if you specify one). You can choose to have your pension paid back to a maximum of 11 months from the date they receive your application, but no earlier than the month after your 65th birthday. If you choose to start your pension later than 65th birthday your pension will be increased to recognize this delay. Your pension will increase by 0.7% per month (8.4% per year) you choose to delay the receipt of your pension. If you choose to delay receipt of your pension until the month following your 70th birthday, your CPP retirement pension will be increased by up to 42%.
According to Service Canada, there is no financial benefit to waiting past the age of 70 to begin receipt of your CPP retirement pension.
Must I stop working before I can begin receipt of my CPP Retirement Pension?
No. You can start your CPP retirement pension as early as age 60 or as late as age 70 without having to stop working or reduce your earnings.
If I start my CPP retirement pension but continue working, will I still have to pay CPP contributions off my pay cheque?
If you are younger than 65 and working, CPP contributions are mandatory, even if you have started to receive your CPP retirement pension. You cannot elect to stop contributing to CPP.
After 65 however, if you continue to work, and have started to receive your CPP retirement pension, you can elect to stop making contributions to CPP. To stop contributing you must complete a specific form (available on Service Canada’s website) and give it to your employer. If you do not complete the form and give it to your employer then contributions are required to continue.
If you continue to contribute to CPP (either before or after 65) your CPP retirement pension will grow each year to recognize these contributions.
Is my CPP pension taxable?
Yes, the amount is considered taxable income, however, CPP does not usually remove income tax from the amount you receive. Therefore, at the end of the year many recipients will owe income tax. It is advisable to review your income tax situation; if you would prefer to have income tax taken off your monthly CPP pension you can contact Service Canada and request they remove some funds for income tax purposes.
Is CPP protected against inflation?
Yes. The CPP pension is automatically adjusted every January to reflect any increase in the cost of living as measured by the Consumer Price Index.
When do payments stop?
The last payment is for the month in which the contributor dies.
For additional general information regarding Canada Pension Plan, contact Service Canada at www.canada.ca or by calling toll-free in Canada and the United States: 1-800-277-9914 If you have a hearing or speech impairment and use a teletypewriter (TTY): 1-800-255-4786 From outside Canada and the United States (collect calls accepted): 613-990-2244
If you wish to contact the Pensions and Benefits unit, please email us at firstname.lastname@example.org
This publication contains general information and is intended as a reference only. It is not intended as a substitute for independent legal advice regarding your particular situation.