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CPP: What is the Canada Pension Plan?

Canada Pension Plan

The Canada Pension Plan is a monthly income retirement plan that provides retirement, disability, and survivor benefits to contributors and their families. This retirement plan is funded by Canadian employees as well as employers. To qualify for this retirement plan you:

• must be at least 60 years old

• must have made at least one valid contribution to the Canada Pension Plan.

To get CPP monthly payments, you have to apply in advance as the payout is not automatic. The CPP operates all over Canada except Quebec, as one can avail of the Quebec Pension Plan there.

When to start the CPP?

Ideally, the standard age for starting a pension is 65, but one can start at the age of 60 or delay it till 70. The benefit of starting it later is that you can receive a larger monthly pension amount.

If a person starts CPP before the age of 65, the monthly payments will decrease by 0.6% each month, summing up to 7.2% annually. A maximum of 36% will be reduced if it is started at the age of 60.

If a person starts after the pension at the age of 65, the monthly payments will increase by 0.7%, summing up to 8.4% annually. A maximum of 42% will be increased if CPP is started at the age of 70 or after.

How much can a person receive?

The CPP monthly payment amount depends on different factors, such as:

• The age when you start to receive the pension.

• The number of contributions to the CPP

• The average earnings throughout the working life.

The average monthly amount received in October 2020 was $614.21. One can estimate their monthly CPP retirement pension payments by logging into their “My Service Canada” Account.

Suppose a person is still working while receiving CPP and decides to keep making contributions, each of these contributions will result in an additional post-retirement benefit, further increasing the retirement income.

The application process

The CPP application process consists of the following steps:

• Make sure that you qualify

• Decide when you wish to start your pension

• Decide on how to apply

• Submit the application

• Review the application status

If you disagree with the decision, you can apply for the decision review within 90 days of receiving the decision letter.

CPP Payments

Once the CPP payments start, you can receive them for the rest of your life. This amount will be credited directly to your bank account or, you can get a cheque of the amount through the mail during the last three business days of each month.

The amount of CPP payments will increase every January if there is an increase in the cost of living as per the Consumer Price Index. But the monthly payment won’t go down if the cost of living decreases.

The CPP pension is a taxable income. If you want to cancel your CPP retirement pension, you can do up to 12 months of the first payment, and you must return any payments received by you.

Other benefits

Besides CPP, you may also qualify for other CPP benefits like:

• CPP Post Retirement

• CPP Disability pension

• CPP Post-retirement disability

• CPP survivor’s pension

• Children’s benefit

• Death Benefit. 

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