Canada Pension Plan
What you really need to know
For many Canadians CPP payments represent a meaningful portion of their annual incomes in retirement. If you are not already retired, knowing how much you be entitled to is a bit of a mystery.
The simplest way to figure out your entitlement is to get it from Service Canada. Your statement of contributions is available by logging in to “My Account (https://www.canada.ca/en/employment-social-development/services/my-account.html). The portal will allow you to print or download a copy of your “Statement of Contributions” which will show how much you have contributed since you were 18.
More importantly your Statement of Contributions will show an estimate of how much you could receive on a monthly basis if you were to start now (or at age 60 if you are under 60), at age 65, and at age 70. The age 65 number is the one to which you should pay the most attention to as it will be used when calculating any bonus or penalty which may be applied to your final income entitlement. The closer your current age is to 65 the more accurate the numbers on your statement will be.
How do the bonuses / penalties work?
Depending on whether you delay the start of your CPP beyond age 65 or choose to start before age 65 the amount you receive will be adjusted up by the bonus rate or down by the penalty rate. For each month beyond age 65 you delay the start of your CPP your income will increase by 0.7% (or 8.4% per year). Similarly, for each month ahead of age 65 that you start your benefits you will be penalized by 0.6% (or 7.2% per year).
When you are trying to decide on when you should start your benefits here are a few key things to keep in mind:
- ⬥CPP is fully taxable just like employment income or withdrawals from your RSP.
- ⬥CPP is a fully funded system (meaning changes that would see something like OAS claw back being introduced is unlikely).
- ⬥Your start date has no impact on what you or your partner might receive when it comes to survivor benefits.
For 2019 the maximum CPP benefit was $13,854 / year for a person starting the pension benefits at age 65. Very few people receive the maximum. The current average benefit is $8,150 / year. Don’t assume you will get the maximum, but don’t forget to include CPP as part of your future choices.