Canada Pension Plan
All individual who works in Canada (except those who work in Quebec) contribute to the Canada Pension Plan (CPP).
The Canada Pension Plan (CPP) retirement pension provides a monthly benefit to eligible applicants.
The CPP operates throughout Canada, except in Quebec, where the Québec Pension Plan (QPP) provides similar benefits.
The CPP and QPP work together to ensure that all contributors are protected, no matter where they live.
If you have contributed to both the CPP and QPP, you must apply for the QPP if you live in Quebec or for the CPP if you live elsewhere in Canada. Please note that you do not have to apply to both plans. Your benefit will be paid by the plan according to your place of residence. The benefit amount you will be paid will take into consideration all contributions made to both plans.
The standard age for beginning to receive your Canada Pension Plan (CPP) retirement pension is the month after your 65th birthday. However, you can take a reduced pension as early as age 60 or begin receiving an increased pension after age 65.
The amount of your pension will depend on how much and for how long you have contributed to the CPP and on your age when you want your pension to start. If you take it before age 65, your pension will be reduced, by up to 32.4% at age 60. If you take it after age 65, your pension may be larger, by up to 42% at age 70.
Calculations to determine your reduced or increased amount is calculated according to the rates in the table above.
When planning your retirement you should never plan on getting the maximum amount. The average payout amount is only $640.23 per month. This is a long way from the maiximum amount of $1065. The amount you get from the CPP is based primarily on the amount you put into it.
The best way to determine how much you will get is to call Service Canada 1-800-277-9914 and ask for a CPP Statement of Contributions. They will provide you with access to your online statement.
So how do you get the maximum and why is it that most people do not qualify for the maximum amount? To be eligible to receive the maximum amount you must meet the following two criteria:
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Contribution - you must contribute into CPP for at least 83% of the time that you are eligible to contribute and that period is between the age of 18 and 65 which is 47 years. So 83% of 47 years is 39 years, which leaves you with a maximum of 8 years without contribution.
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Amount of Contribution - Every year you work and contribute to the CPP, you add to your benefit. To qualify for the maximum, you must not only meet the first criteria, but you must also contribute "enough" in each of those years. In order to contribute the maximum amount your earnings must meet or exceed the Yearly Maximum Pensionable Earnings (YMPE). The yearly maximum for the past 7 years are:
2015 – $53,600
2014 – $52,500
2013 – $51,100
2012 – $50,100
2011 – $48,300
2010 – $47,200
2009 – $46,300
As you can see, it is not easy to be eligible for the maximum amount. You wl need to make more than the above amounts and for those planning to further their education, getting a degree will easily cost you 6 years leaving you with 2 years of down time or early retirement consideration.
Post Retirement Benefit (PRB)
If you work while receiving your Canada Pension Plan (CPP) retirement pension, you may increase your retirement income with a lifetime benefit. This is called the Post-Retirement Benefit (PRB). You might be eligible if you are:
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60 to 70 years of age
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working and contributing to the CPP
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receiving a retirement pension from the CPP or the Quebec Pension Plan (QPP)
To get this benefit, you and your employer have to make CPP contributions toward the PRB. If you are self-employed, you have to pay both the employee and the employer portions of the CPP contributions.
Once you reach 70, you will stop making CPP contributions toward the PRB.
Contribution is mandatory if you continue to work up to 65 and becomes vonluntary between 65 and 70.
Calculating your PRB Amount:
Like the CPP retirement pension, the amount of each PRB will depend on how much you earn, the amount of CPP contributions you made during the previous year, and your age as of the start date of the PRB.
You can get an estimate of your PRB amount by using the Canadian Retirement Income Calculator (CRIC) located here:
http://www.servicecanada.gc.ca/eng/services/pensions/cric.shtml
The maximum PRB for one year is equal to 1/40th of the maximum CPP retirement pension. If you contribute less than the maximum, the amount of the year's PRB will be proportional to your contributions.
For example, if you contributed half of the maximum contribution level, you will receive 50 percent of the maximum PRB.
The example below will demonstrate that the supplement PRB amount is not only cumulative i.e. added to the previous year's PRB amount, but it (the last amount before you stop working) will remain in effect until you die.
