The Canada Pension Plan (also known as CPP) is one of the main retirement income programs for Canadians. It is, in other words, a Canadian retirement pension plan that provides a taxable monthly income for retirees, if you qualify (i.e. did you make payments).
When you qualify, more on that below, your CPP payments will be paid on a monthly basis. You can opt to receive a cheque or have the funds deposited directly into your bank account.
You should expect to get paid towards the end of the month for budgeting purposes. Do note that you may also be eligible for OAS payments and both together can provide a decent addition to your monthly retirement income.
The maximum CPP payment for 2020 is $1,154.58 but don’t expect to be getting that. The average Canadians receiving CPP received on average $679.16 for 2020.
The annual CPP payment growth is approximately 2.22% over the past 10 years based on the Consumer Price Index. More details on what to expect below.
It’s worth noting that Quebec has its own version of the CPP known as the QPP (Quebec Pension Plan).
CPP Quick Facts
There is a lot of details below but here are quick answers to the most common questions.
What is the maximum CPP for 2021?
The maximum monthly CPP for 2021 is $1,203.75 for a total annual pension income of $14,445.00 if you match the contribution requirements. Read more.
Will CPP benefits increase with inflation?
CPP benefits increase every year to take into account inflation. The average increase over the past 10 years has been 2.2%. Read more.
How much CPP will I get at 60?
While you can start receiving your CPP at 60, it may not be the best as you are impact for taking it ahead of 65.
The average CPP payments is $736.58 per month and should give you a quick idea of what to expect. An accurate picture is more complex to calculate and varies per person. Read more.
Should I defer CPP until 70 years of age?
It’s really personal to your situation and generally, if you have a pension and a retirement plan, the numbers usually point to deferring until later but you really need to do the math. Read more.
Can I collect CPP while working?
The short answer is yes you can. The long answer is that you need to figure out what is the most optimal way to receive your CPP from a tax perspective. Read more.
Can I collect CPP while living abroad?
Yes you can collect CPP while living abroad. It’s your money after all unlike OAS payments.
Can I collect my deceased spouse’s CPP?
A surviving spouse can receive her deceased spouse’s pension but there are guidelines. It’s simple and you can find details on the Canadian Government’s site for Survivor’s Pension.
CPP Payments for 2021
The amount of CPP you will receive is based on your contributions, just like a pension plan. The more years you contribute and the more years you contribute the maximum, the better your payments will be.
Last but not least, when you decide to receive your CPP will also have an impact. In short, there are 3 variables to the amount of CPP you will receive:
- The number of years you paid into the CPP plan.
- The amount you have paid into the CPP plan.
- When you decide to receive your CPP Payments.
How Much CPP Can I Get?
For 2021, the maximum monthly amount you could receive at age 65 is $1,203.75 and the average Canadians receive is $736.58. As outlined above, how much you will receive depends on your personal situation.
As it happens, the Canadian government has a calculator you can use to see how much you could potentially earn based on your historical contributions. It’s mostly an exercise in simulation unless you have the exact numbers.
To get an exact amount on how much you could potentially get, you’ll need to get your CPP statement of contributions. By calling Service Canada (1-800-277-9914) and requesting for your CPP Statement of Contributions, you will be provided with access to your online statement.
Do make sure how much you need to retire in Canada before you build a plan with CPP in mind.
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How Can I Get the Maximum CPP?
How to get the maximum CPP is a question many have. Unfortunately, it’s too late if you ask the question just before retirement, but if you plan ahead, here is what must happen to get the maximum CPP.
In simple terms, you need to contribute the maximum CPP for 39 years of your working life between 18 and 65 years of age. If you have ever reached the maximum, you will know that since your pay increases once you are done.
Usually, once your salary reaches a certain level, you have passed the threshold of contributing the maximum. For simple math, if you earn more than $60,000 you are over the threshold.
Now, the technical term for the maximum threshold is called Year’s Maximum Pensionable Earnings or YMPE. It is adjusted every year and is currently set at $61,600 for 2021. That part covers the income and contribution part of getting the maximum CPP and the second part is to work for 39 years with a salary at this level.
Assume it takes you 6 years to get to the maximum threshold, that’s 45 years of working experience and consider you finish university at 23 or 25, that brings you at 70 years old which is after the time you can start taking CPP.
In short, it’s really hard to get 39 years of work contributing the maximum to your Canadian Pension Plan.
As such, don’t count and don’t budget the maximum CPP for your retirement plans.
CPP Payment Dates For 2021
|January 29, 2020||May 27, 2020||September 28, 2020|
|February 26, 2020||June 26, 2020||October 28, 2020|
|March 27, 2020||July 29, 2020||November 26, 2020|
|April 28, 2020||August 27, 2020||December 22, 2020|
Eligibility for CPP Pension
To qualify for the Canada Pension Plan, you must:
- be at least 60 years old
- have made at least one valid contribution to the CPP
Valid contributions can be either from work you did in Canada, or as the result of receiving credits from a former spouse or former common-law partner at the end of the relationship.
CPP is not an automatic enrolment, you MUST apply to start receiving your CPP payments. As long as you are eligible, you will receive your CPP as it’s your money. However, you should know that CPP payments are taxable, just like OAS payments.
What is the Best Age to Start CPP?
Should I collect CPP at age 60? That’s the most common and first question all retirees ask. There are no set rules for when to start collecting CPP payments, it’s really based on your own situation.
As pointed earlier, it’s a taxable income so your annual income after the age of 60 plays a key part. Are you withdrawing from RRSP or TFSA or both?
You have to start planning your income streams such as, but not limited to, the following:
- RRSP Withdrawals
- TFSA Withdrawals
- Non-Registered Income (Dividends, or Capital Gains)
- CPP Payments
- OAS Payments or more specifically the OAS Clawback.
- Full-Time or Part-Time Income
It’s time to put Excel to work and build a spreadsheet. It will help you find the best approach overall.
While many will opt to receive CPP is 65. You can opt for an early CPP starting at 60 years of age. In that case, your benefits will be decreased by 0.60% each month (7.2% penalty per year). The end of the spectrum is to delay CPP until the age of 70 and receive an increase of 0.70% per month (8.4% increase per year).
What that means is that you have a lot of numbers to think about and you probably need to simulate each of the years between 60 and 70. That’s pretty much what a financial advisor would do by plugin the numbers and running simulations.