What You Need to Know About the Canada Pension Plan (CPP)
As you approach retirement, understanding the Canada Pension Plan (CPP) is crucial for planning your financial future. Whether you're retiring soon or you are already retired, this article will walk you through everything you need to know about CPP, from eligibility and benefits to how and when you can apply.
What is the Canada Pension Plan (CPP)?
The Canada Pension Plan (CPP) is a government-run program that provides a source of a monthly, taxable retirement income to Canadians. It is a social insurance plan that is funded by the contributions of employees, employers and self-employed people as well as the revenue earned on CPP investments. The CPP covers virtually all employed and self-employed people in Canada, excluding Quebec, which operates its own comprehensive plan, the Quebec Pension Plan. The CPP is the second pillar of Canada’s retirement income system, which also includes the Old Age Security and the Guaranteed Income Supplement (the first pillar) and private savings (the third pillar).
Where Does CPP Money Come From?
CPP funds are primarily derived from contributions made by working Canadians and their employers. Every employee contributes a portion of their earnings to the CPP, and their employer matches this contribution. The self-employed contribute both the employee and employer portions. These contributions are then pooled and invested to generate returns that help sustain the program.
Who is eligible to receive CPP?
To be eligible for CPP benefits, you must:
Have made at least one valid contribution to the CPP during your working years.
Be at least 60 years old to begin receiving retirement benefits.
Eligibility for other CPP benefits, such as the disability benefit or survivor's pension, has different criteria, depending on your specific situation.
Who manages the CPP investment portfolio?
Canada Pension Plan Investment Board (CPP Investments) manages the fund of the more than 22 million contributors and beneficiaries of the Canada Pension Plan. CPP Investments is independent of the Canada Pension Plan (CPP) and operate at arm’s length from federal and provincial governments and are guided by an independent highly qualified, professional Board of Directors.
When can you start receiving CPP?
You can start receiving your CPP retirement benefits as early as age 60 or as late as age 70. The standard age to begin receiving CPP is 65, but you have the flexibility to start earlier or later depending on your financial needs and retirement plans. Keep in mind that taking CPP before age 65 will result in a reduced monthly benefit, while delaying it past age 65 will increase the benefit amount.
There’s no benefit to wait after age 70 to start receiving the pension. The maximum monthly amount you can receive is reached when you turn 70.
How to apply for CPP?
Applying for CPP is a straightforward process that can be done online, by mail, or in person at a Service Canada office. Here’s how:
Online: Use your My Service Canada Account to apply online.
Paper Application: Download and complete the CPP Retirement Pension Application form, then mail it to the address indicated on the form.
It’s advisable to apply for CPP about six months before you want your payments to start.
Click here for the step-by-step application process.
How long will you receive your CPP?
Once you start receiving your CPP payments, they will continue every month for the rest of your life. Your monthly payment will increase in January of each year if there's an increase in the cost of living, as measured by the Consumer Price Index
How much CPP will you receive?
The amount of CPP you receive depends on several factors:
the age you decide to start your pension
how much and for how long you contributed to the CPP
your average earnings throughout your working life
As of 2024, the maximum monthly amount you can receive if you start your CPP at age 65 is $1,364.60. However, the actual amount most people receive is less, based on their individual contribution history. The average monthly amount paid for a new retirement pension (at age 65) in April 2024 was $816.52.
Will CPP be taxed?
Your CPP retirement pension counts as income and is taxable. The Canada Revenue Agency (CRA) will include CPP payments as part of your income when determining your tax liability. Taxes aren’t automatically deducted from your monthly CPP payments, you can request that federal income tax be deducted from your monthly CPP payments to avoid owing a large amount at tax time.
What happens to your CPP when you die?
When a CPP contributor passes away, their survivors may be eligible for certain benefits, including:
CPP Death Benefit: A one-time payment to the estate of the deceased.
CPP Survivor’s Pension: A monthly benefit paid to the surviving spouse or common-law partner.
CPP Children’s Benefit: A monthly payment for qualifying dependent children of the deceased.
CPP Payment Dates
CPP payments are made monthly, usually on the third-to-last business day of each month.
For 2024, the payment schedule is as follows:
January 29, 2024
February 27, 2024
March 26, 2024
April 26, 2024
May 29, 2024
June 26, 2024
July 29, 2024
August 28, 2024
September 25, 2024
October 29, 2024
November 27, 2024
December 20, 2024
The Canada Pension Plan is a critical component of your retirement income, providing financial support throughout your retirement years. Understanding how it works and planning accordingly can help you maximize your benefits and ensure a secure financial future. Whether you're about to retire or already enjoying your retirement, it's never too late to make informed decisions about your CPP benefits.
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