Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) retirement pension is a monthly, taxable benefit that is meant to supplement your income when you retire. Assuming you qualify and have made adequate contributions to the plan, you will receive the pension for the rest of your life. To qualify you must:

Be at least 60 years old; and

Have made at least one valid contribution to the CPP

Valid contributions are:

Contributions made by you through your employer

Contributions made by you through self-employment

receiving credits from a former spouse or former common-law partner at the end of the relationship

Commencement of CPP monthly payments is not automatic. The individual needs to apply in advance to start the monthly payments. There are two ways to apply:

Online at Canada.ca, or

By paper application

There are three options available as to the commencement date:

Start receiving the CPP payments as soon as you qualify

Start receiving the CPP payments the month after your 65th birthday

Start receiving the CPP payments at a date of your choosing

Deciding on when to receive your CPP retirement pension depends on your finances, taxes, health, and life expectancy. For example, if you are still working and earning an income, CPP pension amounts may shift you to a different tax bracket resulting in higher taxes. In this instance, it will be wiser to wait.

You must file a paper application if any of the following applies (source: Canada.ca):

you have previously received a CPP disability benefit that stopped prior to your 65th birthday, or you have been denied a CPP disability benefit

at any time between the ages of 18 to 25 you received a CPP children's benefit that was not paid directly to you

at any time when you were under age 18 you received or were denied a CPP children's benefit and you did not receive a CPP children's benefit after age 18

you're receiving a CPP survivor's pension that you qualified for through an International Social Security Agreement

you live outside Canada or

you have an authorized third-party such as a power of attorney or trustee that manages your CPP account

The major of advantage of filing online versus paper, is the approval timeline. It takes an average of 120 days to process the application by paper - versus 7-14 days online.

Pension amount received will depend on several factors:

Average earnings throughout working life

Amount of contributions to the CPP and

The age when the individual commences CPP payments. As mentioned earlier, the earliest an individual can receive the CPP is 60 and as late as 70. The earlier you start receiving the payments the smaller the payments will be. At 70, the individual will receive the maximum pension amount. There are other factors that can affect the amounts received such as taking time off from work to care for children

In addition to CPP retirement pension, the individual may be eligible to receive other CPP benefits which we will discuss in greater detail in future blogs. Some of these benefits are:

Post-retirement benefit

Disability pension

Post-retirement disability benefit

Survivor's pension

Children's benefit

Death benefit

When a Canada Pension Plan (CPP) beneficiary dies, their benefits are cancelled and the benefits which are received after the month of death must be repaid to the Government of Canada. Benefits payable for the month of death are not prorated. If an individual was receiving CPP and Old Age Security (OAS) benefits at the time of death, payments will continue to be made until the Government of Canada is notified of the death by funeral service administrator (i.e., a funeral home).

For further information or if you need to prepare a will, please visit the nearest Softron office or contact Softron at:

Telephone: 1-877-SOFTRON, Website: www.softrontax.com