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What you need to know about Working in Retirement and Post Retirement Benefit

CPP Overview

The Canada Pension Plan (CPP) ensures that in the case of retirement, disability, or death, a partial replacement of earning will be provided to CPP contributors and their families. CPP contributions are made by most of Canadians who work outside of Quebec.

Post Retirement Benefit (PRB)

Post-Retirement Benefit (PRB) was introduced in 2012 which allows Canadians, who are receiving Canada Pension Plan retirement pension, to continue to contribute to the CPP if the individual is still working. Contributions made will go forward to the person’s PRB that leads to increasing funds in that individual’s retirement income. In other words, PRB is like CPP, indexed lifetime benefits, that will be paid monthly.

Post-Retirement Benefit (PRB) Eligibility

In able to be eligible for PRB, you have to meet all of the following conditions:

  • Between the age of 60 to 70

○ 60 to 65 years of age

CPP retirement pension recipients who are under 65 years old and still working must contribute to the CPP

○ 65 to 70 years of age

Contribution to the CPP is optional when you are 65 years of age or older

  • Contributing to the CPP while still working
  • Collecting a retirement pension from either the CPP or the Quebec Pension Plan (QPP)

However, not only you but also your employer(s) need to contribute to the CPP. If you are self-employed, you need to contribute to both the employee and employer portions of the CPP. Additionally, CPP contributions will be stopped when you reach the age of 70.

To stop or continue to contribute to the PRB:

CPT30 form needs to be filled out if you wish to stop contributing to the PRB. A copy of the form has to be sent to your employer, and the original form also needs to be sent to the Canada Revenue Agency (CRA).

You can start contributing once again by submitting section D of a new CRA form CPT30 to CRA and send a copy of the form to your employer.

However, only one change can be made per calendar year. Contact CRA if you are self-employed.

Post-Retirement Benefit (PRB) Calculation

Three elements affect your amount of PRB:

  • Your income while working in retirement
  • The contribution amounts you made to the CPP during the previous year
  • Your age when you start contributing to the PRB

Two ways could help to calculate your PRB amount:

The Canadian Retirement Income Calculator

The Canadian Retirement Income Calculator (CRIC) could be used to help you estimate the amount of your PRB. The CRIC can also calculate an estimated number of your CPP and OAS.

Max PRB =  Max CPP retirement pension

If your contribution is less than the maximum, the amount of the year’s PRB will be proportional to your contributions.

The PRB Formula (Monthly Payment)

Post-Retirement Benefit (PRB) Formula - Cascadesfs

PRB = A x B x C

A =  Your pensionable earnings divided by the YMPE for that year

B =  1/40 of the maximum age-65 retirement pension for the year following the earnings

C =  The age-adjustment factor. It is a percentage based on your age as of January of the year following the earnings

What you need to know before contributing to PRB

PRB’s Effects to Other Benefits

Each new PRB will be added to any previously earned PRB and any of your entitled CPP benefits.

Even if you are receiving the maximum amount from your CPP, you can still build up your retirement income by contributing to the PRB. However, PRB might impact your ability to be eligible or to be benefited from the Old Age Security pension, the Guaranteed Income Supplement, or other provincial or territorial programs.

Notes: After the retirement pension starts, the contributions made do not create eligibility for, or increase the amount of, other CPP benefits.
The PRB cannot be shared with a current spouse or divided with a former spouse.

Contributions to CPP

Contribution rate toward the CPP is the same as all CPP contributions:

  • Employees: 4.95% of pensionable earnings
  • Employers: 4.95% of the employee’s pensionable earnings
  • Self-employed contributors: 9.9% of net pensionable income

Overall, it is necessary to take in consideration of all factors that could potentially affect your client’s retirement income. At Cascades – Retirement Income Planning software, we develop the algorithm that helps to bring the most income to your clients with the least amount of tax paid. Try Cascades now for FREE for 30 days.

Cascades - a new framework for retirement and estate planning

References:
https://www.theglobeandmail.com/globe-investor/retirement/retire-working-in-retirement/could-the-post-retirement-benefit-work-for-you/article34700906/
https://retirehappy.ca/ cpp-post-retirement-benefit/
https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement/before-apply.html
http://www.workingafterretirement.com/tax-issues-canada/
http://www.moneynewsdaily.com/how-to-calculate-your-cpp-post-retirement-benefit-prb/

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