Canada Pension Plan
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The Canada Pension Plan (CPP) provides contributors and their families with retirement, disability, survivor, death and children’s benefits. It is an example of a Defined Benefit Plan. The Canada Pension Plan operates throughout Canada with one exception, the province of Quebec has their own Quebec Pension Plan (QPP) that is similar to the Canada Pension Plan.
With very few exceptions, every person in Canada over the age of 18 who earns a salary must pay into the Canada Pension Plan. You and your employer each pay half of the contributions. If you are self-employed, you pay both portions. The amount you pay is based on your salary. If you are self-employed, it is based on your net business income (after expenses). You do not contribute on any other source of income, such as investment earnings. You only pay contributions on your annual earnings between a minimum and a set maximum level (these are called your "pensionable" earnings).
Your eventual benefits are based on your contribution history, how much you have contributed and how long you have contributed. There is some protection built into the CPP system for low-earning years.
You are required to apply to receive CPP benefits. If you made CPP contributions the year before starting your pension, make sure they do an adjustment once the pension is in pay.
The retirement pension is a monthly payment available to CPP contributors beginning as early as 60 years of age or as late as age 70.
The disability benefit is a monthly benefit available to qualified CPP contributors and their dependent children.
Survivor benefits are paid to a deceased contributor’s estate, surviving spouse or common-law partner and dependent children. Benefits include:
- The death benefit – a one-time payment of up to $2,500 to, or on behalf of, the estate of a deceased Canada Pension Plan contributor;
- The survivor's pension – a monthly pension paid to the surviving spouse or common-law partner of a deceased contributor. Maximum monthly benefits in 2009 are $506.38 for individuals younger than 65 and $545.25 to those over age 65; and
- The children's benefit – a monthly benefit in 2009 of $213.99 for dependent children of a deceased contributor.
Canada Pension Plan payments are taxable income.
Payment dates and direct deposit
If you have not requested payment by direct deposit, your payment will arrive at your home address by mail during the last three banking days of each month. You can request payment by direct deposit, which automatically deposits your Canada Pension Plan and Old Age Security payments into your bank account in Canada, the United States, or in a number of other countries.
Changes to the Canada Pension Plan - 2011
The following changes to the CPP will be phased in gradually between 2011 and 2016, with the first major change occurring in January 2011 for people retiring after age 65:
- Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65 (gradually from 2011 to 2013).
- Your monthly CPP retirement pension amount will decrease by a larger percentage if you take it before age 65 (gradually from 2012 to 2016).
- The number of years of low or zero earnings that are automatically dropped from the calculation of the CPP retirement pension will increase (in 2012 and 2014).
- You will be able to begin receiving your CPP retirement pension without any work interruption (starting in 2012)
- If you are under 65 and you work while receiving your CPP retirement pension, you and your employer will have to make CPP contributions. (or if you work outside of Quebec while receiving a QPP retirement pension) (starting in 2012). These contributions will increase your CPP retirement benefits (starting in 2013).
- If you are age 65 to 70 and you work while receiving your CPP retirement pension, you can choose to make CPP contributions (or if you work outside of Quebec while receiving a QPP retirement pension)(starting in 2012). These contributions will increase your CPP benefits (starting in 2013).
You will not be affected by these changes if you started receiving a CPP retirement pension before December 31, 2010, and you remain out of the work force.
Quebec Pension Plan
Quebec is the only province that has opted out of the Canada Pension Plan. The RRQ - The Québec Pension Plan is the province's pension plan. The purpose of the QPP is to provide persons who work in Québec (or have worked in Québec) and their families with basic financial protection in the event of retirement, death or disability.
- Service Canada, Canada Pension Plan (CPP), Viewed July 16, 2009
- Service Canada, Canada Pension Plan Contribution Rates, viewed July 22, 2012.
- Service Canada, Retirement Pension, Viewed July 16, 2009
- Service Canada, Disability Benefit, Viewed July 16, 2009
- Service Canada, Survivor Benefits, Viewed July 16, 2009
- Service Canada, Canada Pension Plan (CPP) - Payment Rates, Viewed July 16, 2009
- Service Canada, Canada Pension Plan Rates and the Consumer Price Index, Viewed July 16, 2009
- Service Canada, Direct Deposit - Frequently Asked Questions, viewed July 22, 2012.
- Service Canada, Changes to the Canada Pension Plan(CPP), Viewed February 2, 2011
- RRQ - Québec Pension Plan, viewed February 6, 2012