The Canada Pension Plan (CPP) is a contributory, earnings based social insurance program. It forms one of the two major components of Canada’s public retirement income system, the other component being Old Age Security (OAS). As of September 2017, the CPP Investment Board (CPPIB) manages over C$328.2 billion in investment assets for the Canada Pension Plan on behalf of 20 million Canadians. The CPPIB is one of the world’s biggest pension funds.
In Québec, the Québec Pension Plan (QPP) provides similar benefits to the CPP. The CPP and QPP work to provide Canadians with a partial income replacement at the time of retirement, disability or death.
Employee contributions to the CPP and QPP are based on a percentage of earnings in excess of the basic exemption. The employer contribution is equal to the employees contribution, and the contribution rate of someone self employed is equal to twice the employee rate. Contributions are usually administered through payroll deductions, which are then remitted to the Receiver General for Canada. As of 2018, the employer and employee contributions were 4.95% (5.4% for the QPP) of the employees earnings, and the Yearly Maximum Pensionable Earnings (YMPE) is $55,900.
The maximum annual CPP payment one could receive at age 65 in 2018 is $13,610. The maximum QPP payment at age 65 is the same. As of July 2018, the average payment for new CPP/QPP recipients is $8077.20
The types of benefits offered by the CPP/QPP include:
Accessible as early as age 60, and as late as age 70. Collecting CPP/QPP early results in reduced pension (0.6% for each month taken before age 65), and delaying the start of the pension results in an increase (0.7% for each month taken after age 65).
If you are under 70 and still working while receiving your CPP retirement pension, you can continue to contribute to the CPP. Your contribution will go toward post-retirement benefits which will increase your retirement income.
You and your children might receive a monthly benefit if you become severely disable to the extent that you are not able to work at any job on a regular basis.
Your surviving spouse might receive a pension due to your death.
A one-time payment will be provided to (or on behalf of) the estate of a deceased CPP contributor.
Disable or deceased CPP contributor’s dependent children will be provided with monthly payments.
Other provisions of the CPP include:
CPP retirement pension might be share voluntarily between married or common-law couples in an ongoing relationship
Credit splitting for divorced or separated couples
If you and your spouse or common-law partner divorce or separate, the CPP contributions made by both of you could be divided equally.
Child rearing provision
The “child-rearing provision” could be used to increase your CPP benefits to raise your children if you stopped working or received lower earning.