Started in the year 1995, the Canada Pension Plan or CPP is a contribution-based social insurance plan started by the Canadian government to help citizens live A comfortable retirement life. There are other pension plans in Canada like the Old Age Security (OAS) Pension, Guaranteed Income Supplement, etc. Canada Pension Plan contributes greatly to your after retirement life. If you are wondering how much CPP will I get, then this article is for you!
The Canada Pension Plan (CPP)
Canada Pension Plan in addition to retirement benefits also includes the CPP benefits for people with disability, survivors benefits, and children’s benefits. To be eligible for this plan, you have to fulfill these qualifications.
- You should be at least 60 years old.
- You need to have made at least one contribution to CPP during 18 to 65 of age.
If you fulfill these requirements you can expect this payment to be made on the 3rd to last business day of each month. These below are the Canada Pension Plan payment dates for 2021:
January 27, 2021
February 24, 2021
March 29, 2021
April 28, 2021
May 27, 2021
June 28, 2021
July 28, 2021
August 27, 2021
September 28, 2021
October 27, 2021
November 26, 2021
December 22, 2021
There are certain advantages for contributing to CPP as stated below.
- It acts as your safety net for retirement.
- You may get a disability pension based on your condition under CPP.
- There is a benefit of the survival pension plan.
- Your children can get CPP children’s benefit in any unfortunate event of an accident or disease.
- There is also a death benefit of $2500 given to your nominees by filling Form ISP1200.
What Affects CPP?
Well, this thing depends on three major elements.
- The age when you start receiving your pension.
- Your amount and time period of contributing to the Canada Pension Plan.
- Your average income when you are employed.
The earlier you start paying for CPP, the more benefit you will get in the future. There are certain guidelines if you want to get the maximum amount for CPP benefits, which I will get back soon. At present, the maximum CPP benefits you can get at the age of 65 is $1203.75. The maximum contribution you can make to CPP is $316 6.45 for employees and employers. If you are a self-employed taxpayer, you can pay a maximum of $6332.90.
For the year 2021, if you are above the age of 18 and if you are earning $3500 yearly, then you are supposed to contribute to CPP. For people living in Quebec, the contribution is made to the Quebec Pension Plan (QPP). It is crucial to note that CPP contribution is divided between employer and employee at the same rate. This means that if your CPP contribution is $4000, then you would pay $2,000 and your employer would pay $2,000. It reduces the rate to 5.45 percent for employees on their gross earnings.
How Much CPP Will I Get?
If you start taking your pension at the age of 60, you are likely to lose 36 percent of your pension amount. If you start taking the same amount before you turn 65, then every month you are likely to receive 0.6 percent less, which comes at around 7.2 percent every year.
Though you can delay the CPP which is called deferment. If you delay receiving your CPP till the age of 70, you may get 0.7 percent more every year which comes at 8.4 percent annually. It means that you will receive 42 percent more in the Canada Pension Plan. You should know that there is no advantage of a delay in receiving CPP beyond the age of 70. You may even lose out on benefits if you do so.
The below chart will help you to know how much maximum amount you can get annually at the age of 65 as CPP.
|Year||Yearly Maximum CPP||Monthly Maximum CPP|
How Can You Recieve Maximum CPP?
Just because the maximum CPP is provided doesn’t mean that you are qualified to receive it. There are certain parameters that you need to fulfill in order to receive CPP in full. They are listed below.
Contribution to the CPP Account
This is a major criterion that you need to fulfill. When you become eligible to contribute to CPP you need to have been contributing at least 83 percent of the time. If your contributing years to CPP is 39 years at the least, you make it eligible for the maximum amount.
The Amount Contributed to CPP
In the same way that years matter in contributing to CPP, the amount that you contribute between the ages of 18 to 65 is also important. The method used here is called Yearly Maximum Pensionable Earnings (YMPE), which suggests whether the contribution you have made is enough or not. The below table will help you identify the same.
So if in any of these years, if you have contributed less due to the lesser income mentioned above, there are chances that the amount needed to qualify for the maximum payout may be missed.
Taxes on Canada Pension Plan
This is one of the top queries of people contributing to the Canada Pension Plan. The answer is yes that you have to pay taxes on your earnings from CPP. The below table will help you identify the same.
|$49,020 or below||15 percent|
|Between $49,020 to $98,040||20.5 percent|
|Between $98,040 to $151,978||29 percent|
|Between $151,978 to $216,511||29 percent|
|$216,511 and above||33 percent|
Apply for CPP
There are two methods to start your contribution to the Canada Pension Plan as mentioned below.
- Download this form and mail the same to the Service Canada Centre.
- This method may take approx 120 days.
- For this, register for your My Service Canada Account (MSCA).
- It will show you the anticipated amount you would receive for your pension each month or year.
- After submitting your application, you are likely to get a notification.
- This method would take up to 7 days to 14 days for your application approval.
The Bottom Line
There have been some changes in the CPP structure in 2019. When it started, it was designed to provide 25 percent of the pre-retirement level income, but it has been changed to 33.33 percent. In addition to that, the rate of contribution to the Canada Pension Plan has also increased. The employee and employer contribution is now 5.45 percent from 5.25 percent. It is structured in a way that the rate would continue to increase until it reaches 5.95 percent in 2023.
Retirement is considered the second inning of life. So, it is important that you plan for it in advance and save money so that when the time comes you have the time of your life. I hope this article has helped you know “how much CPP will I get”. Plan in advance, and reap the benefits!