CPP FAQ’s

Frequently Asked Questions About CPP

Who is eligible?
Anyone who has made at least one contribution to the Canada Pension Plan can claim a government pension.

How much will I get?
The primary determinants of the monthly benefit you receive once you start to collect CPP are the amounts you contributed on an annual basis, the frequency of contributions between ages 18 & 65, and the age you start to draw benefits. 

As of January 2015 the maximum monthly benefit at age 65 was $1,065.  If you take your pension after age 65, your monthly payment amount will increase by 0.7% for each month of delay up until age 70.  Starting your benefits before age 65 carries a penalty of 0.58% for each month early from 2015 and 0.60% for each month early starting in 2016.

Once all factors (penalties & bonuses and total contributions), the average Canadian is receive around 50-60% of the maximum benefit.  In our experience the typical professional or executive can expect a CPP income of around 75% of the maximum before giving consideration to any bonus or penalty adjustments.

How do I get my projected CPP income for age 65?
An estimate of what your projected CPP income will be at age 65 is available from Services Canada when you request your statement of contributions.  Your request can be made online, over the phone, or via printed form.  For more detailed instructions on apply for your statement of contributions please click the below link.

Apply for your statement

When did the rules change?
The rules that determined the monthly amount you receive in retirement remained unchanged from 1965 through to 2012.  Until the end of the year 2012 you were only penalized for starting the benefit early.  In other words each individual had a total of 61 possible start date options (the months between your 60th and 65th birthdays inclusive).  From 2012 the penalty for taking CPP increased (and has continued to increase).   From 2013 however there was a bonus paid for every month beyond your 65th birthday you chose to defer your CPP benefits.  This increased the number of start date choices to 121 for each individual.

Note there is no financial benefit in delaying taking your pension after age 70.

How does widow’s allowance (also called survivor benefits) work?
Upon the death of the first spouse, the surviving spouse is entitled to a widow’s allowance.  In addition to the total combined CPP benefits being capped at the maximum CPP benefit, the value of the survivor benefit is calculated as a function of the survivor’s age, the benefit entitlement of the deceased spouse, and the survivor’s own CPP allowance.  The basic formulas that determine the value of the widow’s allowance are:

  • 60% of the deceased spouse’s benefits if the survivor is 65 or older
  • 37.5% of the deceased spouse’s benefits plus a flat rate benefit if the survivor us under 65

The calculations become more complex as you take in to consideration the bonus and penalties accrued, if the survivor is under age 45, entitled to their own CPP benefits, divorced, or eligible for CPP disability benefits.

How are CPP benefits taxed?
CPP benefits are taxed in the same fashion as employment income, pension income, and RRIF withdrawals.

 

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