The Canada Pension Plan (CPP) is a crucial part of Canada’s social security system, providing financial security to workers and their families in the event of retirement, disability, or death. In this article, we’ll dive into the details of the CPP and how it works, including who is eligible for benefits, how contributions are calculated and paid, and what types of benefits are available and when they are paid out.
Canada Pension Plan Payments Schedule (Canada Pension Plan & Old Age Security Pension)
- January 27, 2023
- February 24, 2023
- March 29, 2023
- April 26, 2023
- May 29, 2023
- June 28, 2023
- July 27, 2023
- August 29, 2023
- September 27, 2023
- October 27, 2023
- November 28, 2023
- December 20, 2023
Eligibility for the CPP
To be eligible for the CPP, you must have contributed to the plan through your employment or self-employment earnings. In general, you must have contributed to the CPP for at least one year to be eligible for benefits.
However, there are some exceptions to this rule. For example, if you are disabled and unable to work, you may be eligible for CPP disability benefits even if you have not contributed to the plan. Similarly, if you are the surviving spouse or common-law partner of someone who was receiving CPP retirement benefits at the time of their death, you may be eligible for survivor’s benefits even if you have not contributed to the plan yourself.
Calculating And Paying CPP Contributions
As an employee, you are required to contribute to the CPP through deductions from your paycheque. Your employer is also required to contribute to the CPP on your behalf. The amount of your CPP contributions is based on your earnings, with a maximum amount set each year. In 2023, the maximum amount of earnings subject to CPP contributions is $66,600, and the maximum contribution is $3,754.45.
If you are self-employed, you are responsible for paying both the employee and employer portions of the CPP contributions (totaling $7,508.90). You can claim a credit for the employer portion when you file your tax return.
Canadian Pension Plan Benefits
There are several types of CPP benefits available.
Retirement Benefits
If you are over the age of 60 and have contributed to the CPP, you may be eligible for retirement benefits. The amount of your benefits is based on how much you have contributed to the plan and how long you have contributed. You can choose to start receiving your CPP retirement benefits as early as age 60 or as late as age 70. The earlier you start receiving your benefits, the lower they will be, and the later you start, the higher they will be.
Disability Benefits
If you are under the age of 65 and unable to work due to a disability, you may be eligible for CPP disability benefits. To be eligible, you must have contributed to the CPP and meet the medical criteria for disability. The amount of your disability benefits is based on your contributions to the plan.
Allowance For Survivors
If you are the surviving spouse or common-law partner of someone who was receiving CPP retirement benefits at the time of their death, you may be eligible for survivor’s benefits. The amount of your survivor’s benefits is based on the deceased’s contributions to the plan.
Children’s Benefits
If you are the parent of a child under the age of 18 (or under the age of 25 if they are in full-time attendance at a recognized school or university), you may be eligible for CPP children’s benefits. The amount of your children’s benefits is based on your contributions to the plan.
How To Apply For CPP Benefits
To apply for CPP benefits, you will need to complete an application form and provide supporting documentation, such as proof of your identity, proof of your contributions to the CPP, and any medical information required for disability benefits. You can apply for CPP benefits online through the Service Canada website, or by contacting Service Canada by phone or in person at a Service Canada office.
It’s important to note that you should apply for CPP benefits as soon as you are eligible, as there may be a waiting period before your benefits start. For example, if you apply for retirement benefits at age 60, there is a four-month waiting period before you start receiving benefits. If you apply for disability benefits, there is a two-month waiting period.
How To Maximize Your Canadian Pension Plan Benefits
The CPP is just one part of your overall retirement plan. It’s important to consider all of your sources of income, including any employer pension plans, personal savings, and government benefits such as Old Age Security (OAS).
Here are three ways to maximize your CPP benefits.
1. Working Longer
As mentioned earlier, the later you start receiving your CPP retirement benefits, the higher they will be. This can be a good option if you are in good health and enjoy your work.
2. Making Voluntary Contributions
If you are over the age of 18 and not yet receiving CPP retirement benefits, you can make voluntary contributions to the plan. This can increase your benefits when you do start receiving them.
3. Splitting Your Pension With Your Spouse
If you are married or in a common-law relationship, you may be able to split your CPP retirement benefits with your spouse or common-law partner. This can be a good way to maximize your combined retirement income.
It’s also important to consider other factors that can affect your CPP benefits, such as changes to the CPP rules or changes to your personal circumstances. For example, if you take a break from work to raise children or care for a family member, you may have gaps in your CPP contributions. This can impact the amount of your benefits when you start receiving them.
Can I Receive My CPP Outside Of The Country?
Pensioners moving abroad in retirement can still receive their CPP payments regardless of their location. Payments can be made in the currency of the country they reside in. However, if there is no tax treaty between Canada and the country of residence (e.g., the United States), withholding taxes may apply.
The Bottom Line
The Canada Pension Plan is an important part of Canada’s social security system. It provides financial security to workers and their families in the event of retirement, disability, or death. To be eligible for CPP benefits, you must have contributed to the plan through your employment or self-employment earnings. There are several types of CPP benefits available, including retirement benefits, disability benefits, survivor’s benefits, and children’s benefits. To apply for CPP benefits, you will need to complete an application form and provide supporting documentation. It’s important to consider the CPP as part of your overall retirement plan. Also consider factors that can affect your benefits, such as changes to the CPP rules or personal circumstances.
