Canada Pension Plan

If you retire before age 65, your Canada Pension Plan (CPP) benefits are lower, since you have contributed for fewer years and will likely collect benefits for a longer period than someone who retires at age 65 and even more so than those who retire at 70.

Monthly reductions in benefits increase for those who plan to collect CPP benefits before age 65, being reduced by 0.6% per month by 2016 meaning that those who collect at age 60 in 2016 will receive 36% less in benefits than if they wait until they are 65. Remember that if you are 60 before 2016, your benefits are subject to a lower reduction and may be in your best interest to file for collection before reductions increase over the next few years.

By 2013, eligible contributors who begin collecting CPP at age 70, your benefits will be 42% more than if taken at age 65. Each month that you delay collecting benefits after age 65, your CPP increases by 0.7%.

Drop Out Provisions

Almost all contributors are entitled to the general drop-out provision, which allows you to exclude a portion of your years of zero or low earnings from the calculation of your retirement benefit. This is a benefit if you have experienced work interruption due to job loss, child rearing or other reasons and can eliminate up to 8 years from the calculation as of 2014.

Elimination of the Work Cessation Test

As of 2012, you may begin receiving your CPP without any work interruption. The elimination of the Work Cessation Test makes it easier for Canadians to make a phased transition to retirement.

The New Post-Retirement Benefit

If you are receiving CPP and still working, you may continue to make CPP contributions, which will increase your payments through the Post-Retirement Benefit (PRB). If they are under age 65, contributions are mandatory but for those who are age 65 to 70, contributions are voluntary (their employers will have to contribute if they do). People between the ages of 60 and 70 who make these contributions may begin to receive the PRB the following year.

Contributions made while beneficiaries are receiving their CPP retirement pensions build up only the PRB. Note that these contributions do not increase the amount of other CPP benefits, nor are they subject to a credit split or retirement pension sharing.

PRB rises with increases in the Consumer Price Index, providing protection from increases in the cost of living and is paid for life.

How do I qualify?

You qualify for a CPP retirement pension if you worked and have made at least one valid contribution (payment) to the Plan and if:

  • you are at least 65 years old; or
  • you are between 60 and 64 years old, and you meet the earnings and contributions requirements set out in the legislation.

To use the online CPP application, you must:

  • be at least one day past the month following your 59th birthday;
  • have contributed to the CPP;
  • want your retirement pension payments to begin within 11 months from today;
  • have access to a printer;
  • use a computer that meets minimum computer requirements
  • have your JavaScript enabled

What you need before you begin:

  • Your Social Insurance Number (SIN);
  • If you wish to arrange for Direct Deposit, please have the financial institution number of your bank, the branch and account number;
  • If you lived or worked in a country other than Canada and want to apply for benefits from that country, give details of when you worked or lived outside Canada and your Social Insurance Number there;
  • Your spouse or common-law partner’s SIN, if you want to take advantage of pension sharing for possible tax savings;
  • If you were the primary caregiver of any child or received Family Allowance or Child Tax Benefits while they were under the age of 7, you need to provide:
    • the SIN of each child; and,
    • the date of entry into Canada for each child born outside of Canada.

For more information on financial planning, please contact our office at 1 (800) 798-0044.

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CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.