Canada Pension Plan

About the Canada Pension Plan (CPP)

From the age of 18, almost everyone who participates in the paid labour force in Canada contributes to the Canada Pension Plan (CPP) or to its sister plan, the Quebec Pension Plan (QPP), and will at some time benefit from their provisions.

Established by an Act of Parliament in 1965 and implemented in 1966, the CPP is a jointly managed federal-provincial plan. Quebec manages and administers its own plan, the QPP, and participates in decision making for the CPP. (QPP information is available from the Régie des rentes du Québec at www.rrq.gouv.qc.ca.) Benefits from either plan are based on pension credits accumulated under both. The plans are financed through mandatory contributions from employees, employers and self-employed people, as well as from investment income.

While it is perhaps best known for its retirement pensions, the CPP also provides disability, death, survivor and children's benefits. Benefit calculations are based on how much and for how long a contributor has paid into the CPP and, in some cases, the age of the beneficiary. Benefits are not paid automatically—everyone must apply and provide proof of eligibility.

Changes to CPP 2011

Presently, 65% of CPP retirees commence pension at age 60 to 64, 31% start pensions at age 65 and only 4% postpone CPP pension commencement until after age 65. Until recently, the rules for retiring were fairly straightforward. Full CPP is paid at age 65, with a .5% a month reduction or increase for every month that you advance or delay your first payments.

Proposed changes to the CPP will make things more complicated but fairer. One of the many changes to CPP is that there will no longer be a 2 month work cessation test, allowing people to continue working, and still begin receiving CPP payments. That will simplify matters for people reviewing their options. Because the changes are so numerous, we have attached a full presentation on the topic.

• Modernizing the Canada Pension Plan

We are here to help you make sense of this in the larger framework of your retirement planning and would be pleased to review your personal retirement income projections and help explain what the changes mean to you. Contact us for more information.

More on the Canada Pension Plan

General

• Canada Pension Plan website: Service Canada
• Canada Pension Plan Investment Bureau information site - Find out how they are investing your money
• The OAS and CPP info site - includes retirement income calculator, among other useful information.

Articles from the Managed Money Reporter

• Canada Pension Plan - Examining the pending changes
• Pensions - Fact or fiction
• Will Your Money Keep Working When You're Not?

Changes to CPP 2011

• Changes to the Canada Pension Plan: Service Canada
• Modernizing the Canada Pension Plan: Human Resources and Skills Development Canada
• Scotiabank's analysis on changes to CPP