What do I need to know about Canada Pension Plan (CPP)?

The Canada Pension Plan (CPP) is a social insurance program that provides retirement, disability, and survivor benefits to eligible Canadians. The CPP is funded by contributions from employees, employers, and the self-employed, and is managed by the federal government.

The CPP is designed to replace a portion of an individual's income when they retire. To be eligible for the CPP, individuals must have contributed to the plan for at least one year. The amount of the CPP benefit is based on the individual's contributions and the number of years they have been in the plan.

The CPP is an important part of Canada's retirement income system, and provides income security for seniors. If you are planning for retirement, it is important to understand how the CPP works and how it can benefit you.

How the CPP Works

The CPP is a pay-as-you-go plan, which means that benefits are paid for by contributions from today's workers. CPP contributions are deducted from an individual's paycheque, and are matched by their employer. The self-employed must contribute both the employee and employer portions of the CPP.

The contributions are invested in a special fund, and the earnings on the investments are used to pay for the CPP benefits. The CPP is a long-term plan, and is designed to provide benefits for the rest of an individual's life.

How Much Will I Get?

The amount of the CPP benefit is based on the individual's contributions and the number of years they have been in the plan. The maximum CPP benefit for 2022 is $1,253.49 per month.

To receive the maximum CPP benefit, an individual must have contributed to the plan for at least 40 years. Generally, the CPP benefit is reduced for those who have not contributed for the full 40 years. It is possible, however, for a mother or father to receive the maximum pension if they have worked for less than 40 years due to the impact of the CPP child-rearing provision.

When Can I Start Receiving Benefits?

CPP benefits can be taken as early as age 60, but the benefits will be reduced by 6% per year if they are taken if an individual retires before age 65. The earliest an individual can receive CPP benefits is the month after their 60th birthday.

The CPP benefits are increased by 7.2% per year if they are taken after age 65. The latest an individual can start receiving CPP benefits is the month after they turn 70.

How is the CPP Benefit Paid?

CPP benefits are paid monthly, and are deposited directly into an individual's bank account.

What if I am Self-Employed?

If you are self-employed, you are required to contribute to the CPP. The self-employed contribute both the employee and employer portions of the CPP.

What if I am a Homemaker?

If you are a homemaker, you may be eligible for the CPP if your spouse is contributing to the plan. To be eligible, you must have been married for at least one year, and must have lived with your spouse for at least four months.

What if I am a Student?

If you are a student, you may be eligible for the CPP if you are working and contributing to the plan. You can choose to opt out of the CPP if you are a full-time student.

The CPP is an important part of Canada's retirement income system, and can provide you with income security in retirement. If you are planning for retirement, it is important to understand how the CPP works and how it can benefit you.

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Always seek advice from your financial planner. If you are a member of one of the BC Public Sector Pensions plans, you can see what the Pension Corporation says about your situation. Their pages provide a detailed summary of your options.