Area of Law: Seniors / Elder Law
Answer Number: 727
Canada Pension Plan benefits (CPP)Region: Ontario Answer Number: 727
Canada Pension Plan (CPP)
The Canada Pension Plan (CPP) is a benefit plan for retired workers to protect them and their family against the loss of income due to retirement, disability and death. The Plan is administered by the federal Department of Employment and Social Development Canada through Service Canada.
Types of CPP benefits
There are three kinds of CPP benefits:
- Disability benefits: available to people who have made contributions to the CPP, and whose disability prevents them from working at any job on a regular basis (includes benefits for disabled contributors and benefits for their dependent children);
- Retirement pension: available to individuals who have worked, have made at least one payment to the CPP, and are at least 60 years old; and
- Survivor benefits: paid to a deceased contributor’s estate, surviving spouse or common-law partner and dependent children. Survivor benefits include a death benefit, the survivor’s pension and the children’s benefit.
Who can receive Canada Pension Plan benefits?
Workers who have contributed to the CPP are eligible for benefits when they retire. The amount of benefits that someone is eligible for will depend on how long the person or their spouse worked and paid into the plan. Workers pay a portion of their wages into the CPP fund until they retire. The amount an individual pays is based on their salary. If they are self-employed, it is based on their net business income (after expenses).
Generally, the following workers are entitled to receive CPP benefits:
- employees making contributions to the CPP, whether they are just starting their career or are planning to retire soon;
- self-employed people who contribute to the CPP;
- people between the ages of 60 and 70 who work while receiving their CPP retirement pension.
At what age can workers collect Canada Pension Plan benefits?
CPP benefits are usually paid to workers when they retire at the age of 65. If a worker retires earlier, between the ages of 60 and 65, they may still be eligible for benefits, although the benefit amount may be reduced. If the worker dies, the benefits may be paid to the worker’s spouse. If the worker becomes disabled and can no longer work, the CPP may begin paying benefits before the worker turns 65.
Rules that apply:
- The monthly CPP retirement pension amount will increase by a higher percentage if taken after age 65.
- The monthly CPP retirement pension amount will decrease by a larger percentage if taken before age 65.
- A longer period of low earnings will be automatically dropped from the calculation of the CPP retirement pension.
- Contributors will be able to receive their CPP retirement pension without any work interruption.
- If you are under 65 and you work while receiving your CPP retirement pension, you and your employer will have to continue making CPP contributions. These contributions will increase your CPP benefits.
- If you are between the ages of 65 and 70 and you work while receiving your CPP retirement pension, you can choose to continue making CPP contributions. These contributions will increase your CPP benefits.
It is important to note that if a person started receiving a CPP retirement pension before December 31, 2010, and remained out of the work force, they will not be affected by the above rules.
To start receiving benefits when you retire, you will need to fill out an application form available online, or from a Service Canada Centre in your area. You can also request that a form be mailed to you. To complete an application in person you will need to provide a proof of age document, such as a birth certificate. Visit canada.ca for more information.
Proposed enhancements to the CPP beginning January 1, 2019
In July 2016, the federal government, and every province except Quebec, reached an agreement, in principle, to enhance the CPP. Enhancements to the CPP are intended to augment the current CPP along with an individual’s personal retirement savings, so that people would have a sufficient source of income during retirement.
Changes to the CPP proposed by the new agreement will begin in January 2019 and include:
- increasing the percentage pension benefit from 25% to 33% of pre-retirement income. Based on the 2016 maximum salary of $54,900, the 2016 maximum benefit is $13,110, which will increase to about $17,500. (The maximum pre-retirement income is set every January based on the increase in the income of Canadians).
- increasing the maximum amount of income on which CPP contributions are paid by 14% – from $54,900 to $82,700 when the program is fully phased in by 2025. This means middle-income workers will be eligible to earn CPP benefits on a larger portion of their income.
- increasing the federal Working Income Tax Benefit
- making employees’ contributions to the enhanced portion of the CPP tax-deductible instead of the current tax credit. This will reduce income taxes for middle-income workers.
- increasing both employer and employee contribution amounts over a 5-year period, beginning January 1, 2019. The employer and the employee each pay about 4.95% of the eligible salary. This amount will increase to about 5.95% each. Beginning January 2019, the per month amount will increase by about $7.00 for each (total of $14.00 per month).
- all widows and widowers will receive full Survivor benefits, regardless of age, dependent children or disability. Currently, anyone under 35 years of age without children or a disability must wait until they are 65 to receive benefits. Those who were previously denied because of their age will be eligible to re-apply for the benefits when the rules come into effect in 2019. Benefits for current recipients will automatically be recalculated upwards.
For more information regarding the proposed enhancements to the CPP, visit ontario.ca.
For additional information about the Canada Pension Plan and to apply for benefits, visit the Government of Canada website.
For legal advice and assistance, contact a lawyer.
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