Canada Pension Plan (CPP)

Changes to the Canada Pension Plan were included in Bill C-51, which was passed on December 15, 2009 and were fully phased in by 2016. They benefit workers to differing degrees depending on several personal factors shown below.

Adjustments for Early and Late CPP Benefit Payments

If you wait to collect benefits until after age 65 you will get an increase in your benefit of 0.7% for every month beyond that age for a total increase of 42% at age 70. 

You can collect CPP benefits at age 60, even if you continue to work. If you collect before age 65 your monthly benefit will decrease by 0.6% for every month prior to age 65. The total decrease at age 60 will be 36%.

Continue CPP Participation While Receiving Benefits

Those under 65 who choose to receive benefits and carry on working are required to make payments to CPP until age 65 and the employer is also obligated to continue contributing. The monthly benefits will increase to compensate for the extra contributions during that period.

Employees can voluntarily elect to make CPP payments beyond age 65 until age 70. If a pensioner elects to make these later contributions, her employer will also be required to contribute. This will further increase monthly benefits.

Calculating Average Career Earnings

The CPP uses a career average calculation which allows for certain years of low or no earnings to be disregarded in arriving at average earnings.

If you take benefits at age 65, the span of your career is considered to be 47 years. If the CPP is taken at age 60, the span of your career is considered to be 42 years.

17% of an employee’s potential working career is disregarded. This allows a maximum of 8 years to be dropped, based on a working career of 47 years (age 18 to 65)

This provision helps more Canadians come closer to the maximum pension. It also increases the average disability and survivor pensions, which are based on the retirement benefit calculation.

Lots of Flexibility and Choices to Consider

There's certainly an incentive to stay in the workforce longer and retire with a higher pension. But what is good for you? Would it be better for you to take benefits early and continue to work or retire? Or, would it be better for you to take Canada Pension Plan benefits at age 65 or, perhaps, age 70?

The answer depends on your retirement income needs, your ability or desire to continue working and maybe even your expected longevity.

Your financial adviser can help you work through the process of deciding when it is beneficial for you to begin receiving benefits.

For a quick reference sheet click here:                                                       CPP Basics Benefit Amounts

For more information about CPP click on this Canadian Government link: Canada Pension Plan