Canada Pension Plan (CPP) is one of the cornerstones of retirement income planning. Currently, the maximum CPP retirement benefit is $934.17 per month at age 65.
Don’t count on the maximum
When planning for retirement, the first piece of advice I give is not to plan on getting the maximum. When you look at the average payout of CPP, it’s just a little over $500 per month, which is a long way from the maximum. In other words, not everyone gets the maximum. At the most basic level, the amount you get from CPP depends on how much you put into CPP.
The best way to figure out how much CPP you qualify for is to get your CPP statement of contributions. Call Service Canada 1-800-277-9914 and ask for a CPP Statement of Contributions. They will provide you with access to your online statement.
How to get the maximum?
Why is it that so many people do not qualify for the maximum amount of CPP? The best way to answer that is to look at how you get the maximum retirement benefit. Eligibility to receive the maximum CPP benefit is based on meeting 2 criteria:
- Contributions – The first criteria is you must contribute into CPP for at least 85% of the time that you are eligible to contribute. Essentially, you are eligible to contribute to CPP from the age of 18 to 65, which is 47 years. 85% of 47 years is 40 years. Thus, the way I like to look at CPP is on a 40-point system. If you did not contribute into CPP for at least 40 years between the ages of 18 to 65, then you won’t get the maximum. If so, then you might get the maximum but there is another consideration.
- Amount of contributions – Every year you work and contribute to CPP between the age of 18 and 65, you add to your benefit. To qualify for the maximum, you must not only contribute to CPP for 40 years but you must also contribute ‘enough’ in each of those years. CPP uses something called the Yearly Maximum Pensionable Earnings (YMPE) to determine whether you contributed enough. The new YMPE for 2010 is $47,200, which is up from 2009 when the YMPE was $46,300. Basically if you make less than $47,200 of income in 2010, you will not contribute enough to CPP to qualify for a point on the 40-point system. For those of you that make more than $47,200, you will probably notice that part way through the year, your paycheques will go up a little. This happens because you have paid the maximum amount of CPP for the year and no longer have a CPP deduction.
As you can see, it’s not easy to qualify for full CPP especially with the trend of people entering into the workplace later because of education and people retiring earlier.
The easiest way to figure out your CPP eligibility is simply get your CPP statement of contributions. Once you have that document, it will list all the years you are eligible to contribute from age 18 to 65. It will show you how much you contributed in each of those years. If you contributed the maximum, it will have the letter ‘M” assigned for that year. All you have to do is add up all the M’s to see if you are eligible for the maximum. If you have 40 M’s you’ll get the maximum. If you have 20 M’s you will get approximately half the maximum (you might get some partial credits for part years).
Planning your retirement needs and income requires some understanding of how much you will get from CPP. Many people either assume they will get the maximum or assume they will get nothing at all because they fear the benefit may not be there in the future. Both these assumptions have significant flaws. Take the time to personalize the planning by understanding how the CPP benefit is calculated and how much you will receive.
PDF Related posts:
Thanks Jim, your CPP posts are very helpful.
I still have a question about early retirement that I can’t find an answer for. If you retire at 60 with less than 40 Ms, is the hit then greater than the 60×0.5% = 30% ?
Here are some examples to show the question:
Say you graduate from university or whatever at age 24, never having earned income or contributed to CPP. Than you work for 40 years to age 65 and apply for CPP. You subtract the early 7 years where you had no earning/contributions, still end up with exactly 40 M’s, and get the maximum CPP. That’s clear.
Now, instead, go back in time and start collecting CPP at age 60. We know you get hit 60×0.5% (soon to increase to .6%) and take a 30% hit. Is that the bottom line, or is there an additional hit because for the 47 eligible years, you don’t have 7 zero years, you have 12 (and only 35 Ms out of 40)?
I’m hoping the answer is that the 0.5% per month hit is the way they calculate the effect of having contributed for 42 years instead of 47, and you still get to subtract the 7 lowest years of the 42 years you worked, and you are scored on 35 out of 35 Ms, not 35 out of 40Ms, and your total reduction is 30%.
However, I’m guessing this is not how it works. For example, say you start earning/contributing the maximum right at age 18. You work until 60 and take CPP early. You have 42 years of Ms, but you don’t get to subtract the 5 years for age 60 to 65, and you still take a 30% hit for starting at age 60 even though you have 42 Ms.
My personal example of thinking about retiring today: in 3 years I’ll be 60, have 6 early years of Rs, 33 Ms, and presumably 3 Bs for the next 3 years. Will my amount be 33/40 x MAX x 70% ?
Regards, Rick
I’ve done some more research and I think I can answer my own question now. My last statement is correct. With 6 Rs and 33 Ms, I will get 33/40 x MAX at age 65 and 33/40 x MAX x 70% at age 60.
Actually, I calculate that my R years contributed 3.44 out of 6 possible “points” for those 6 years, so may calculation uses 36.44/40.
If I choose to work some more between now and starting CPP benefits, each full year’s maximum contribution adds 1/40 x $960 or $24/month to my age 65 benefit ($16.80/mo if I start at age 60). Not a very good return, especially if I’m self-employed and have to contribute the entire year’s $4435.20 CPP myself. If I start CPP at age 60, the extra $16.80/mo will take 22 years to break even for the $4435 contribution (11 years with an employer contributing half).
That raises another point. When we say that the break-even point for starting CPP at 60 instead of 65 is at age 77, this doesn’t account for the fact that we would contribute another $12,000 to CPP ($24,000 self-employed) over those 5 years. That pushes the break even point to about 80.5 years (84 self-employed) of age.
Regards, Rick
Rick
You’ve got at least one point wrong with your own answer on early retirement. If you start your CPP at age 60, you’re no longer looking at your best 40 years out of 47. Instead, you’re looking at your best 35.7 years out of 42 years (using the old 15% dropout for the period from age 18 to age 60). That means that your 33 M’s alone will get you to 92.4% of the max CPP, plus whatever your best 2.7 other years amount to.
Well, at first I found this hard to believe since it works in my favour to the tune of about $69 per month! However, I tend to agree based on these definitions and statements from this web page:
http://www.servicecanada.gc.ca/eng/isp/cpp/cppinfo.shtml#a5
“Your contributory period begins when you reach age 18 or January, 1966 (the start of the CPP) and continues until you begin receiving your retirement pension, reach age 70 or die (whichever is the earliest).”
“However, to protect you, some parts of your contributory period can be dropped out of the calculation, such as:
* 15 per cent of your lowest earning years in your contributory period.”
I was thinking that the “contributory period” was always a fixed 47 years for everyone.
My original post had this question:
“Now, instead, go back in time and start collecting CPP at age 60. We know you get hit 60×0.5% (soon to increase to .6%) and take a 30% hit. Is that the bottom line, or is there an additional hit because for the 47 eligible years, you don’t have 7 zero years, you have 12 (and only 35 Ms out of 40)?”
I see now that this calculation is not 35/40 but:
35/35.7 * MAX * 70% (at the old 15% dropout rate)
which is $658.82
If this same person waited until 65 to collect but didn’t continue working and made no further contributions, the calculation is:
35/40 * MAX = $840
Note that the reduction in this case of not working is not 30%, but only 21.6%, not to mention the more than $10,000 in contributions you don’t have to make from age 60 to 65.
Would you please be so kind as to inform me of how much money has gone into my Canada Pension.
You have to call service Canada and get your Statement of Contributions. That is the only way you will know. Good luck!
This information is very helpful.
What do you know about collecting CPP overseas. If one is planning to retire to Panama would she still be able to collect her CPP?
I thank you in advance for your time.
Warmly,
Lisa Horvath BSc. RPC. FLSR.
Heart to Heart Counselling
You can collect CPP even if you are living abroad. Here’s the link for more details
http://www.servicecanada.gc.ca/eng/sc/pensionersabroad/index.shtml
Thanks for sttraing the ball rolling with this insight.
I am currently working for the local government (City employee) so I have a municipal pension plan to which I contribute as well as to CPP. When I retire, will I get both CPP and the Municipal Pension Plan pension incomes or whatever calculation on the MPP already includes the CPP pension?
Yes, you should. CPP is independent from your Municipal pension.
Hi Jim
I saw a comment where you indicated that the Municpal Pension is independant of the CPP.
In fact most government pension plans are intergrated with the CPP. If a government worker starts collecting their pension at say aged 60 . It will include a portion called the CPP off set. Typically Government defined benefit plans only fund 1.3 % per year of service after the pensioner reaches aged 65. In other words they stop getting the off set from their pension plan and start getting CPP at 65.
Hey thanks Dave!
Here in Alberta, my experience is coordination or integration is an option and not mandatory. The only time it’s mandatory is with Federal Government workers.
Even on a municipal level it is technically independent because the municipality does not know exactly how much CPP the employee is entitled to. This may be different in other jurisdictions but from our work with these government entities, I view them as independent. Sometimes two people can view terminology differently which could be the case here.
I really appreciate you posting these comments as you appear to be someone with some experience in this.
Hi Jim
The 4 major BC govt pension plans are integrated and I know the RCMP /DND plan and the Federal govt employees are also.
The amount of the CPP offset is calculated at the time the pension starts and again at 65. Hope this helps
Thanks Dave! I know the RCMP pension is integrated as it’s a federal pension. Good to know about BC. How do you know so much about CPP? Thanks for responding to everyone here!
Jim
I am a happily retired police officer and drawing a pension from the BC Municipal Pension Plan. When working I was the Pólice Provincial pension rep for a number of years and for a short time, Trustee of the Municipal plan which is the 6th largest pension plan in Canada.
As far as the CPP is concerned I’ve just taken the time to dig into it, because on the face of it many people just don’t fully understand it… Jim as you point out unless you have 40 years of maximum contributions you’re not going to get the maximum.
hello jim i was wondering if i could collect any type of, funds from cpp,i only worked for two to two and a years,would cpp have a record of my work history, and how many years i paid into, iam now 53 years of age. thankyou for your time jim many tanks, yours truly robert e brown
You cannot collect any CPP until aged 60 minimum.
If you paid into it thru your employment CPP will have a record of contributions.
hi jim i was wondering if cpp,would pay me any thing back, i paid 2 years into it and al so do they have a work history of me? its been a while, iam now 53 years old. thank you for your time robert e brown
How come CPP requires birth certificates and or social insurance number for children for whom you received family allowance benefits? What if a child is estranged and this information cannot be provided?
They want the documents to help ensure that you get your entitlement from CPP. If you were at home raising children during your working years, these years can be removed from the total required and you’ll recieve a higher CPP. They want to help you but need the documents to prove things. Surely you have copies of your childrens birth certificates.
Good job in explaining the pension and cpp.
but Jim I think it is also through the medium of shuch blogs, we, the citizens of Canada need to be made aware how unfair the pension system is.
Just two examples:
1. People come to Canada under family class and after 10 years if they reach age 65, can collect close to $1800/month for the couple. And this is all paid in spite of the fact that they have not contributed a penny into the treasury!
2. Equally disturing is the fact that an MP or MLA becomes entitled to pension after serving for only 6 years!…. think for a moment..only 6 years and we, the millions of ordinary folks have to work for 40?!?!!?
I CALL ALL CANADIANS TO WAKE UP TO THE FRAUD BEING COMMITED BY THE GOVT. BY GIVING THE MPs and MPLs such fat pensions.
You keep up the good work in educating the citizens of Canada …and please help to wake them up also.
thanks
Jas!
You need to educate yourself. That couple you mention gets not one dime of CPP, unless they both worked AND contributed FULLY (to the amount of pensionable earnings), they will get about 25% of the maximum pension; in today’s money about $240.00 each per month. A far cry from your xenophobic estimate and well deserved considering their contributions. Aside from CPP the couple will qualify for 25% of OAS benefits; should we not care for our senior citizens? Who cares where they lived before? Unless you’re a Status Indian, you would not even be here if your attitudes had prevailed in the past
[...] in Government Benefits 0 Comments – Leave a comment! 0January 1, 2012 is an important date for Canada Pension Plan because the new CPP rules come into [...]
Hi Jim,
I was reading your articles on early retirement in Canada. I understand that to be entitled for CPP retirement pension the Maximum is 934.17.
I also know the average is about 500 pm.
So how much would a person receive as Pension, if he retires at age 60 or Age 65 if he has only made
1-2 contributions to CPP.
Or maybe has immigrated into Canada at age 50, maybe worked for 10 years and took early retirement at age 60 or maybe worked 15 years and retired at age 65,
His annual average earning for all the 10 – 15 years has been about 25,000/- per year.
In Short what is the minimum CPP pension anybody will receive.
Thanks,
Regards,
Terence
Terence
There is no minimum CPP amount, unless you consider it to be $0.01. The amount of your CPP retirement is based on your average lifetime earnings from age 18 until when your benefit starts (earliest is age 60). A rough estimate is $25/mth for each year that you have worked and contributed at the YMPE (Year’s Maximum Pensionable Earnings). The YMPE has increased from being $5,000 in 1966 to being $48,300 in 2011. When you say earnings of $25,000, their value towards a CPP benefit depends on what year they were earned, and what the YMPE was that year. For years until approx 1986, that amount of earnings would have exceeded the YMPE and would be worth about $25 towards a retirement pension. In 2011, it would be about 50% of the YMPE and would therefore be worth about $12.50 towards a retirement pension.
i started working in canada -from october 1992 and plan to retire at 60yrs of age –i am now58yrs old -how much pension do i get when i retire at 60yrs -easrly retirement i suppose
How much you will get depends on how much and for how many years you have contributed.
You can contact CPP and they will provide you with a record of your contributions and some estimates.
If you started working in 1992 and make MAXIMUM contributions until aged 60 (2013) you will have 21 years of the 35.7 years required for maximum pension at aged 60. ROUGHLY this would equate to $400.00 per month. If you paid less than the maximum then of course you’re going to receive less. When you start your pension at aged 60 under the CPP you have had a working life of 42 years (18-60)and they allow up to a 15% reduction for years of low employment in school etc so the 42 years is reduced to 35.7 years. CPP at aged 65 is the maximum and it is reduced by 30% if you take it at aged 60… it is further reduced if you have less than 35.7 years of MAX credits. Hope this helps.
FURTHER TO THE QUESTION I ASKED ABOVE –I WOULD STILL LIKE TO KNOW WHETHER WORKING TWO JOBS WILL HAVE AN IMPACT ON YOUR CCP BENEFITS –I HAVE WORKED 2 JOBS AT LEAST FROM 2000 TO 2010 –FROM 1992 TO 1999 –I JOB–APPROXIMATELY HOW MUCH DO I RECEIVE AT AGE 60 –EARLY RETIREMENT
Hi Sam,
The amount you may contribute each year has a maximum. The amount changes slightly each year. For 2012 the maximum employee contribution is $2306.70 and you must have income of $50100 to contribute that (2306.70)amount.
The number of jobs you have does not change the limits. But if you have 2 jobs, the combined income from both will be used toward reaching the maximum contribution. But again, 2 jobs will NOT allow you to make total contributions above the limits. If you make contributions about the limits they are returned to you through your income tax refund.
THIS IS MY FINAL QUESTION ON THE ABOVE SUBJECT–FROM 1992 TO 2001 – -MY
SOCIAL INS NO STARTED WITH A 9-MEANING I WASN’T A LANDED IMIGRANT YET- FROM AUGUST 2001 I BECAME A LANDED IMMIGRANT AND NOW A CANADIAN CITIZEN-WHAT WILL HAPPEN TO THE CONTRIBUTIONS THAT I MADE WHILE WORKING FROM 1992 TO 2001 -AND 2001 TIL PRESENT-WILL THE GOV’MT- CONBINE THE CONTRIBUTIONS OF THE TWO SOCIAL INSURANCE NUMBERS OR WHAT–IS IT POSSIBLE TO LOOSE ALL THE CONTRIBUTIONS THAT I MADE FROM 1992 TO 2001 SINCE I WASN’T A LANDED IMMIGRANT?–I’M VERY WORRIED ABOUT THIS –HELP ME OUT HERE
Sam – I expect you will be fine and all your contributions will be shown on your statment. You should write to the Canada Pension Plan:
Provide them your full name
Social insurance number &
Date of Birth.
Ask them to provide you a statement of contributions. If you had 2 different social insurance numbers provide them both in your letter.
THANKS FOR THE INFO — ONCEMORE THANK YOU VERY MUCH
we live abroad. my husband and I have both worked for 2 years in Canada and were told as we paid into the system we are entitled to collect a small amount. how do we go about this???
thanks 4 the help
Just contact service Canada
http://www.servicecanada.gc.ca/eng/isp/cpp/cpptoc.shtml
I’m looking for if there is a minimum payout as well -
I’m doing some planning for mother in law who has never worked
If she never worked she gets nothing. You must have made contributions while working to qualify for CPP.
This website is my inhalation , real excellent style and perfect subject matter.
Hi, I have all the details re my pensionable earnings, contributions, etc during the years that I worked.
Can you point me to a place where I can verify how my CPP was calculated which probvides details of the relevant formulae, etc.
Or can you give me a ballpark on the following data:
Contributed to CPP from August 1966 to July 2000 when I retired at age 50. Contributed the maximum from 1971 to 2000 (30 years).
Took CPP at age 60 in 2010 and was was dinged 30% for that.
Any ideas on what the total discount would be?
Thanks for the comment Dianna.
In 2000, you would have gotten 70% of 75% of the maximum CPP at that time. There may be some adjustments for partial contributions from 1966 to 1971. There may also have been adjustment for Child Rearing Drop out if you had kids.
Other than that, it’s too hard for me to ballpark so the best thing to do is call Service Canada http://www.servicecanada.gc.ca/eng/isp/cpp/cpptoc.shtml
Dianna
If you took your CPP at aged 60 you had a working life for CPP purposes of 42 years (18 to 60) when you could have contributed. The 42 yrs is reduced by 15% (to allow for years in school or unemployment) therefore to get the age 60 maximum you needed 35.7 years of full contributions. The age 60 maximum is 30% less than the maximum at aged 65. If you only had 30 years of FULL contributions the aged 60 amount would be reduced by 16%. (30yrs /35.7 =84%). There can be some other considerations for child rearing years, if any.
I agree with Dave’s answer that your 30 years of max contributions would qualify you for 84% of the max age-60 retirement benefit, which would have been 70% of the age-65 retirement benefit. To put some numbers to these percentages, the max age-65 retirement benefit in 2010 was $934.17. The max age-60 retirement would therefore have been $654.29 ($934.17 x 70%) and your benefit should have been about $549.60 ($654.29 x 84%). It would be higher if you did have some partial years of contribution from 1966 to 1971 or if you had children under age 7 during those years.
Just thought I’d point out that Jim’s reply made the same “mistake” that I had made. He said “70% of75% of the maximum”. The 70% is due to the reduction for age 60. The 75% percent is from dividing 30 years of max contribution by 40 years (47-15%), but we’re now saying that at age 60 your contributory period is 42 years not 47. Therefore, 42 minus 15% is 35.7, and the amount is then 30/35.7 or 84%.
Dianna also has 5 years of partial contribution from 1966 to 1970. These fractions would add to her 30 years and increase the 84% by some amount.
You can calculate these partial amounts. For example, in 1974 I contributed $85.05 to CPP. Doesn’t sound like much? The maximum CPP contribution that year was $106.20, so I get 80% credit. Today, you have to contribute $1774 to get 80% credit.
In keeping with percentages, I would say that you’re 100% correct with your comments. The only further comment that I’d like to add is to be a little careful is using contributions to determine your percentage of max, because you don’t pay contributions on the Year’s Basic Exemption (YBE). That means that your contribution of $85.05 in 1974 equated to an Unadjusted Pensionable Earnings (UPE) of $5,425 ($85.05 / 1.8% + $700) which would be 82.2% of the 1974 YMPE of $6,600.
Now it depends how accurate you want your estimate to be, and there’s not a big difference between the two methods near the max YMPE. But for instance, a contribution of $0.01 would equate to about 10.6% maximum YMPE using the conversion to UPE, whereas it wouldn’t even register as a percentage of max contribution.
Have I confused or clarified?
I’m not sure which your are saying is the correct calculation so let’s make sure.
For 1974, the max contribution was $106.20. I contributed $80.05, which is 80.08%. This is the calculation I’ve been using.
Yes, in 1974 my pensionable earnings was $5425 and the YMPE was $6600. Dividing these gives 82.2%.
Which are you saying is correct?
Rick
The link seems to have been disrupted, so I’ll try replying here again.
Using the percentage of your UPE/YMPE would be the correct method, meaning that your 1974 contribution of $85.05 would equate to 82.2% of max YMPE when calculating your retirement benefit.
Rick
The link to your last question seems to be broken, so I’ll try responding here.
The more accurate method would be using your UPE/YMPE, meaning that your 1974 contribution of $85.05 would equate to 82.2% of the max YMPE for benefit calculation purposes, not 80.0%.
[...] was an easy one. How much will you get from Canada Pension Plan? In this article, I don’t just give you a number but I share with you how the CPP is actually [...]
Hi Jim,
I have a question, I helped a client due her retirement application, and she was approved but only receives $549.35 dollars. She has worked all her life and that is her allowance. My question is why are some of the members in her church that just came into Canada never worked getting $1,100.00 dollars did I do her application wrong please help.
If you are aged 60 and have 2 years of MAXIMUM contributions you will likely get about $37.00 per month
No one who just came to canada and never worked here is getting 1100.00 FROM CPP.
It is not true that you have to maximize your contribution for 40 years in order to qualify for maximum benefits. My husband went on http://www.servicecanada.gc.ca and put in the maximum earnings for 20 years and $0 from age 44 and they still say he will get the maximum CPP. I even called them and they confirm that too.
Sorry, but this cannot be true.
There is (or at least there was) a bug in the online CPP calculator such that if you put in $0 for later years the web page puts the maximum value back in. Press BACK and you’ll see it in the form. The best you can do is put in the smallest amount offered ($5000/yr as I recall) and see the reduction.
I reported this bug to the CRA webmaster but it sounds like it hasn’t been fixed yet. (I didn’t check just now).
I can’t explain how they confirmed this on the phone. That can’t be right.
I agree with Rick MacDonald. The innfo you have received is not correct.
If your husband has 24 years of max contributions at age 65 he will definately not get maximum.
Age 65 = 47 yrs working life minus 17 % drop out means you must have 39 years of max contributions to get full CPP at 65. Therefore your husband will get 24/39ths of max.
Thanks Rick and Dave for your responses. The only way you can get a higher amount without the 40 years is with the Child Rearing Drop out. I suspect that has no relevance here given you would need 15 years of drop out. The issue probably has more to do with this glitch that Rick talks about.
Jim
My dad recently received his monthly amount estimate.
The CPP will pay him only 69.76 every month.
He came to canada in 2002 and has been working ever since. He is 65 now.
what can we do to increase this amount or what other benefits can we apply to in order to get a larger benefit because this amount is not enough.
Kindly assist or provide further contacts where we can seek assistance in this regard.
CPP is based on what you put into the program and the number of years. He could delay taking the CPP until age 70 which would give him a little more but I think it would still only total about $100.00 per month. Also I believe under the new rules he could also continue working until age 70 and make additional contributions during that 5 yr period again this would give him more.
Maybe the country he came from has some benefits he could qualify for.
I know of only 2 other programs in canada for seniors. You must qualify for both. Depending on the Province he lives in there may also be some programs?
One is Old Age Security “OAS”
the second is a suppliment based on income “Guaranteed income suppliment.” (GIS)
I believe for the first one there is a length of time in Canada requirment and the second one is based on income. If you search OAS and GIS you will likely find a Canada website from which you can learn more.
http://www.servicecanada.gc.ca
If you search around this website and go to the seniors section you may find this helpful.
As I read the eligibility for OAS your dad would need 10 years in Canada before he could apply and then he would get 10/40ths of the OAS amount. I believe the max presently is about 533.00 per month so he would get a quarter of 533. or about $133.00 per month. AND once he starts OAS he cannot accumulate more years in Canada. In other words if he starts at 10 years he can never claim more than 10 years.
The GIS is income based so more info about his income would be needed to respond in more detail.
I am 65,still working and will begin collecting CPP next month. Will I still have to make contributions to CPP?
If you start your CPP at age 65 but intend to continue to work.
1) You do NOT have to continue to pay CPP.
HOWEVER,
2). Begining January 2012 If you are 65,continuing to work and collecting CPP you have the OPTION of continuing to pay into the plan. Then when you actually stop working or reach age 70 your contributions made after 65 will provide you an additional benefit.
The link below should answer any questions you may have:
http://www.servicecanada.gc.ca/eng/isp/cpp/postrtrben/recipients_after65.shtml
Just for the benefit of others reading this point, it’s important to know that it will become mandatory to continue contributing to CPP if you are collecting CPP between age 60 and 65. This is stated in the same link that Dave provided above.
I did a rough calculation once and for self-employed people who worked enough to get nearly the maximum CPP already. They will have to contribute 9.9% towards CPP for those years from 60 to 65 and it may be that you’ll never get the same amount back from any increase in CPP benefits from these extra contributions. As I said, it was a rough calculation only.
I have just used the Service Canada calculator and it shows max pension $960 and my pension estimate $880. I printed out my contributions history – for years 1970 to now – 24 M notes, 12 R notes, no note for early years when I had little income (1970-1973) and no note for recent years where income just under 40,000 (2006-2010). I would like to really understand how the calculation is done and I would like to know if there’s anything I can done in the next 5 years to ensure that I get the max.
Thank you for any further insight.
I’ll assume that you want to work to 65. If that is the case you have a working life of 47 years (Age 65- age 18) for CPP purposes. The rules allow for a 17% drop out period of when you have zero or low income. (The rule is presently 15% but for this explaination I’ve used the soon to be enacted 17%) Therefore for most people they will need 47yrs – 17% = 39 max (M) years at age 65 to get the maximum pension. I say most people because there is also a potential drop out period for years when your income was zero or low during child rearing years … when children were under age 7 I think it is.
You have 24(M) years and 12 (R) years. If you take the R years and figure out what percentage of the maximim (each year) you contributed and add the percentages up this will convert your R years to the actual number of M years.
Example R years
1)Contribution = 70% of Max
2)Contribution = 30% of Max
3)Contribution = 51% of Max
4)Contribution = 40% of Max
5)Contribution = 62% of Max
6)Contribution = 45% of Max
In the above example for 6 R years they would equal 2.98 M years.
The only way you can max out the next 5 years is to make the maximum contribution based on your income.
If I understnad your post, you report that your CPP statment has no record of contributions for 2006-2010 although you contributed on income of about $40,000 each year (06-10) . If my understnding is correct there is an error in your statment and you should contact CPP and or your employer personnal dept ASAP. Something is definately wrong.
I hope this is of some help.
………….Further. I misunderstood the “no notes” for 2006-10) I understand that your statement shows contributions for those years but just no R note.
Calculate those years like the R years and add them in.
I believe R means they refunded contributions because you over contributed based on your income and having no R means you contributed just the right amount based on your income.
A while ago I tried to reverse-engineer the calculation. I got close, I think.
The short answer is that you’ll get closer to the max if you continue to work and earn the max (around $48000) and contribute the max for the 5 more years that you mentioned.
You say 2006-2010 have no notes, but does it show your amount of contribution? To begin the calculation, for all the R years divide your contribution by the max contribution for that year to get a fractional M value. Add up all the fractions and add that to your 24 Ms.
Oh, drop 15% of the years that you worked with the lowest contribution before adding up the fractions. The rules are changing and soon the 15% will be 17%. That means drop 7 years today or 8 years 5 years from now. But that’s if you’re 65. The calculation is then 47-8 = 39 years. If you have 35.4 Ms five years from now, you’ll get 35.4/39 of the max benefit.
The next part of the estimate calculation is not quite clear, but it works out close. Drop the lowest 6 years of contributions (15% of the 40 years you worked so far = 36) and you get 34 years.
Given $880 from the estimate, they have estimated you have about 92% of the maximum contribution for the last 40 years. 92% of 36 is 32.6. So, I’m estimating that your number of Ms including 17 years of fractions adds up to 32.6.
This isn’t exact, but it seems to be in the right direction. In summary, they estimate your percent-of-max contribution for your years working until now, and apply that to the current max “as if you were 65 today”. So, they don’t extrapolate your last year’s earnings, but the ratio as I’ve described.
You’ll also notice that your estimate will drop by about 50 cents every month until they process your tax return next spring, and then it will jump up a few dollars again.
Back to your original question. The way you increase your benefit by working and contributing for 5 more years is by making sure you replace previous zero or low contribution years that you see on your contribution history with contributions that are a greater percentage of max. If they average out the same 92% of max contribution, you won’t see an increase.
Lastly, look and weep at how few dollars you had to earn back in 1970 to earn a full M (an $85 contribution) compared to what you have to contribute today ($2218 contribution).
Ooops, in one place I have 15% of 40=36 but it should be =34.
OK, I just about to go to bed so here is the proper correction: 15% of 40 is 6 years. 40-6=34.
Final Answer!
Thanks so much for your detailed response. It took me awhile to follow some of the steps, but I now have a much better understanding of the final amount estimated. Yes, and some of those seemingly low 1970s contributions prove to be a higher percentage than I would have thought. I have just started looking at the whole retirement scene and will be sure to check back here when I have future queries.
Merci!
Where a person is on LTD for 20 years are CPP deductions made and credited as if deducted from regular salary? Thanks for your blog, it’s very informative.
When you say disability are you saying you are receiving a disability pension FROM CPP?
No, no disability under CPP, I was inquiring as to whether LTD payments from an employer’s insurance carrier count as income and have CPP deductions which then count towards a CPP pension.
I very much doubt that LTD payments would result in the employer/employee contributions to CPP. …. But, you should check further:
What if anything does CPP say about people on LTD. (Not CPP disability) Does CPP consider LTD payments employment income? (I don’t know)
Is there a union contract involved. What does it say about workers on LTD. Normally if you have sick days (short term disability) under your contract both Employer/Employee contributions continue to be made to CPP. My experience is that when LTD kicks in CPP contributions stop.
Who paid the premimums for the LTD policy & what are the terms of the policy?
Has the LTD – insurance company tried to get you to claim CPP disability pension.
I think the answer is here:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/cpp-rpc/ntsbjct-eng.html
“CPP contributions
Wage-loss benefits paid by an employer, a trustee or an insurance company are not subject to CPP contributions. “
[...] understand the existing options properly (DC plans, DB plans, DPSPs, Group RRSP, LIRA, LIF, LA, CPP, OAS, GIS, etc) and now the PRPP is going to add another option to the [...]
Hi Jim,
I left Canada in 1992 at age 30 (I’m 49). So my CPP contributions must be very low. I know that UK citizens can make catch up contributions to their government pension scheme and also make contributions from abroad. They don’t need to live and work in the UK to make contributions. Is this also the case for Canadians?
Thanks,
Brian
Sorry I don’t know the specific answer to your question but I did find the information below on the CPP website. I suggest you go to the CPP website and if necessary write to CPP with the specific details of your situation. They will also be able to provide you a statement of any contributions you made before leaving Canada. They would require your Canadian SIN.
“Canada has social security agreements with many countries to help people qualify for benefits from either country. An agreement may allow periods of contribution to the other country’s social security system (or, in some cases, periods of residence abroad) to be added to periods of contribution to the Canada Pension Plan in order to meet minimum qualifying conditions.”
Hi
Anyone know of site that will give break-even points for continuing to contribute between 65-70 years while already collecting max CPP and making over max earnings? Or is there some other calculation to help with decision whether to continue contributing (with matching employer contribution) during 65-70 optional years? On the face of it, contributing extra $2300 annually by both employee and employer does not seem to be worth the extra $334 (or so depending on date of birth) per year benefit? Or is it as simple as saying (from the employee’s perspective) that it will take about 7 years to recupe the extra contribution?
Take care
Jim
Thanks
Jim
Jim
Each year of maximum contribution to CPP after starting your retirement benefit will produce a supplementary CPP benefit of approx $25/mth (or approx $300/yr), starting the following year. So, the math is basically as simple as you suggest ($2300/$300 = 7.67 years to make up for the extra contribution). And the makeup period would be twice as long if you were self-employed, since your contributions would be double.
Thanks Doug. This is the conclusion I came to as well. In exploring this issue, I put together some stuff for our faculty newsletter. It is at: http://www.uwfa.ca/uwfa-news/2011/12/9/changes-to-canada-pension-plan.html
One issue that I did not consider enough for some people with high pensions (probably not me) is the possible impact on the OAS clawback. For people in that bracket, some of the additional Post Retirement Benefit could end up being taken back.
Like others have commented, this is a great site.
All the best for the new year.
Take care
Jim
Jim
Thanks for the weblink to your newsletter, and thanks for reminder therein that the Post-retirement benefit (PRB) is subject to the adjustment factor based on your age in January of the year that the PRB begins. This means that the amount of the PRB for a year of max contributions would range from a low of approx $18.75/mthly for a 60 year-old to a high of approx $35.50 for a 70 year-old. Since they would both be making the same contribution, this would also mean the make-up period would vary from about 10 years for a 60 year-old versus 5.4 years for a 70 year-old. Good stuff!
Try the site below. Not sure if it will answer you directly but its a great site. (I have no connection to it)
http://www.taxtips.ca/calculators/cppretirementcalc.htm
In 2002, I was working for different employers and ended up over contributing to my CPP. Because I knew I was getting a refund and was waiting for some paperwork, I didn’t file right away. In the income tax booklet, it states that we have 10 years to file the return, and that any over contributions will be refunded. When I filed 5 years later, I was denied the over contribution because apparently there is a 4 year time limit on the CPP portion, information which is not indicated anywhere when filing taxes. Is there any recourse I can take in this matter that you are aware of?
I would be interested in reading the booklet that you cite states… 10 years to file a return and that over contributions will be refunded.
Its my understanding that by law you must file your income tax by April 30th each year and that if your short information, you report that in an explanatory note with your submission. Also, its my understanding that claiming you had a refund coming does not relieve you of that responsibility.
While I have no expierence dealing with any CPP 4 year limit for refunds,if this is inconsistant with income tax refunds and not a published fact you may be able to argue that on a fairness basis.
Each year CPP sends out statements. It would be interesting to know what your statements said for the years you had not filed your income tax. Normally the statements would indicate a over contribution “R”. If you don’t have a statement you should start by requesting one.
The link below is from CPP – Q&A’s and question 20 may be of some further assistance.
http://www.servicecanada.gc.ca/eng/isp/cpp/cppinfo.shtml#a5
Sorry if I wasn’t clear, I meant you had 10 years to make any changes to your tax return, and it as stated below from the link you suggested question #4:
“If, during a year, you contributed too much or earned less than a set minimum amount, you will receive a refund of contributions when you complete your income tax return.”
Nowhere have I ever read a time limit. I have never received a CPP statement, but I will call on Monday and request a copy.
Thank you for the link and info, it was most helpful and I will investigate that further.
Good luck with your pursuit… hopefully its not a lot of money involved. You also might search the web for the CPP Regulations. This should shed more light on exactly what the 4 years is all about and may identify any exceptions to the limitation period. I expect to overcome the 4 year provision you’ll have to prove that you didn’t have the information to file it in a more timely manner. Although you have 10 years to adjust income tax, CPP is apparently 4 and a refund of over contributions to CPP is not income tax. Q#4 I doubt will be of any help to you in the circumstances you present.
FYI you can order the CPP statement online. I’ve found they respond quickly … within 2-3 weeks.
Link to CPP regs talking about 4 year time limit for refunds.
http://laws-lois.justice.gc.ca/eng/acts/C-8/page-21.html
[...] mixed advantages, or if you will start to obtain these advantages truly. To be more specific with cpp maximum, check this out this page. This entry was posted in Legal. Bookmark the permalink. ← [...]
Jim – you are a blogging machine! First of all, I’ve learned a tonne from your blog. Secondly, you set the bar for blogging regularity. Very cool Jim.
Jim
I’m writing to warn yourself and your readers, about a CPP issue that has affected me and affects about 4,000 other divorced/separated male parents each year. The issue is how the Division of Unadjusted Pensionable Earnings (DUPE aka Credit Split) functions when there were children involved in the relationship.
The DUPE equally shares the CPP earnings (UPE), but does nothing to acknowledge the value of what is known as the Child Rearing Dropout (CRDO). The net result in my case is that my CPP retirement pension estimate at age 65 decreased by about $190/mthly as a result of an 18-year DUPE, whereas my ex-wife’s CPP retirement calculation only increased by about $70/mthly. The reason is that she is able to drop out about 10.5 years under the CRDO provision if those years are less than her “average lifetime earnings”, which is the case for her both before and after the DUPE. I, on the other hand, am stuck with 1/2 max earnings for the 18-year period, only 7-8 of which I can drop out under the general 15-17% dropout provision.
I am currently appealing this situation at the Federal Court level, and would be glad to hear from others that are affected by this situation.
Hello Jim
I worked in Canada – BC for 3 years( worker visa), these were the deductions- CPP approx $6000 and EI – $ 2100. Now I am moved back to US.
I really do not know way forward.
Do i need to wait till 60 years for pension/ EI amount.? Or i can request CRC pay be back?
Please guide
thanks
Sumit
EI is an insurance program. It does not give refunds and as you have returned to the USA you are not eligible to claim, “out of work benefits”.
CPP is a pension program. Yes, to claim a reduced pension you must be a minimum aged 60 (Normal age 65 for an unreduced pension). As you have only contributed for 3 years your pension will be small, likely less than $50 per month. You must apply for it as you approach 60 and CPP will send the cheque to where you live. (You do not have to live in Canada to collect it)
I suggest you start by asking CPP for a statment of contributions; The form and address is on the internet at;
http://www.servicecanada.gc.ca/eng/isp/cpp/soc/soccontus.shtml#c
I also suggest you ask if there is any option to transfer your CPP credits to the USA Social Security System. I don’t know if there is but if there is you might want to consider doing it).
I presume you filed income tax for the years worked in Canada. IF you made over-contributions to either EI or CPP relative to your wages they would have been returned to you as part of your income tax refund.
[...] How much will you get from Canada Pension Plan in Retirement? [...]
1 am 67 years old . i wll be new family sponsered imigrants. i will come to canada in 2012.
any one can guide if i will get ant thing from
canadian pension fund and when
please
sa
The Canada Pension Plan is a contributory program, so you aren’t eligible for any benefits unless you work and pay contributions to the plan. Since you are only 67 now, you could make contributions until age 70 and your pension then could be as much as about $100/mth if you contributed at the maximum rate for those 3 years.
How does this compare to what I would receive if I came to your country at age 67?
If i say that i got family sponsered parents imigration visa .what i will get as social assistane or any financial benefits without breaking my sponsership agreement of 10 years
How much i will get and when , keeping in mind that i am 67 years old and not duing any work
are there any financial benefits for retired family sponsered parents in canada and how long we have to stay in canada
thanks
MY son has sponsered me as family sponsered parent
If i come to canada .How much financial assistance i will get from canadian government
and when i will get it. I am retired person doing no work. i dont want any breach of agreement which we had signed for 10 years with canadian government
I am retired Person 65 years old. My son has spondered me as family imigrant I got imigration visa I know we have signed 10 years agreement and undertaking with canadian government. we dont want any breach of agreement. please let me know if there are any finanacial benefits and when i will ba eligible for it and how much i will get
I am not doing any work
There are no financial benefits available to you. Canadian taxpayers cannot support such. Perhaps some exist in your country of origin; do they? Why would you even ask for benefits if you have contributed nothing? Do you have any sense of fairness or is begging a viable means of support in your opinion?
Joomasa
As you have not contributed to the CPP – Canada Pension Plan and I gather don’t intend to work here from age 67 to 70, you will not receive anything from CPP.
As your son has apparently sponsored you he must support you.
What country are you coming from and what pension are you bring with you from that country.
What agreement are you referring to and what are you expecting to receive?
I paid maximum contributions and was getting maximum pension when I retired almost 10 years ago. Now I have just found out that the maximum for new claims is more than for my claim. Is that fair, are my costs less.
You comment is short of details.
At what age did you retire? What year and month was it? How much was your first cheque before tax (gross amount)? How many years of maximum contributions did you have.
What is the gross amount of your payment now.
Your costs are irrelevant.
Norm
The calculation of your CPP benefit 10 years ago would have been based on the average of the YMPE for the year that your benefit started and the previous 2 or 4 years (I can’t remember when it changed from using a 3-year avg to a 5-year avg). Since then, your benefit has been indexed annually according to increases in the CPI, thus you are keeping pace with increases in prices.
New benefits starting now will be based on the 5-year average of the YMPE for 2012 and the previous 4 years. The YMPE is based on the avg industrial wage in Canada, thus the max benefit for 2012 will be greater than the max 10 years ago, based on the increase in wages over that period of time.
This means that if prices have increased more than wages in the last 10 years, your current benefit should be more than the current max for new benefits, and the opposite should be true if wages increased more than prices. Make sense?
Attention Doug,
Your posts are excellent. The CPP has a normal retirement age of 65 but allows a reduced pension as early as age 60. I’m trying to establish if a spouse would get a monthly survivour pension if;
the CPP eligible partner/wife/husband died before age 65 having decided to delay starting the CPP until the normal age rather than taking a reduced pension.
I heard antidotally that the spouse friend of their’s did not get a monthly survivour pension when her husband died suddenly at age 62 and he had not started his CPP. She only got the 2500 death benefit. The spouse/deceased had no dependant children and there were no disability issues. I don’t know her exact age but believe it to be approximately the same as her late husband.
I’ve tried reading the CPP regs, Website, my own statement, etc but I’m struggling to find a definitive answer. I’ve also faxed the question to CPP Service Canada. If the antidotal story is accurate then this little known fact I expect, would be a significant factor for those needing to decide whether to start their CPP “early”.
Dave
Whether or not a person is in receipt of a retirement pension before they die, has no impact on eligibility to a monthly survivor’s pension for their spouse. The deceased must simply have made enough contributions to CPP (1/3 of the years in their contributory period, subject to a minimum of 3 years and a max of 10 years), an application must be made (separate from the death benefit appln) and the relationship must qualify (legally married or C/L for 1 year). The amount of the survivor’s benefit depends on the amount of contributions by the deceased, the age of the surviving spouse and whether or not the surviving spouse is already receiving his/her own disability or retirement benefit.
I hope this helps, and thanks for the comment on my posts. Yours are very good also!
Both of your responses are not only awesome but very much appreciated. You guys have really added value to this original post and have made this a real resource for so many people.
Jim
Hi Norm,
When questioning fairness you need to be aware that what you paid into the CPP over the years was not enough to provide you the benefit you are receiving. This was not your fault, you were told what the maximum was each year and you paid it. The government allowed this to happened. Generally speaking the older you are the less you paid and the greater the benefit you recieve. In the late 1990′s there was a plan put in place to correct this situation and now those people paying into the plan have to pay a lot more into the CPP to get the same benefit you are receiving. They are paying. 4.95% of YMPE and you years ago paid a lot lower percentage to get the same benefit. I’m 58, and in fact we screwed our younger generation by not properly funding CPP years ago. When asking about fairness please consider … the rest of the story.
Hi Norm,
When questioning fairness you need to be aware that what you paid into the CPP over the years was not enough to provide you the benefit you are receiving. This was not your fault, you were told what the maximum was each year and you paid it. The government allowed this to happened. Generally speaking the older you are the less you paid and the greater the benefit you recieve. In the late 1990′s there was a plan put in place to correct this situation and now those people paying into the plan have to pay a lot more into the CPP to get the same benefit you are receiving. They are paying. 4.95% of YMPE and you years ago paid a lot lower percentage to get the same benefit. I’m 58, and in fact we screwed our younger generation by not properly funding CPP years ago. When asking about fairness please consider … the rest of the story.
Is there any eligibility criteria regarding minimum number of years to work, so that you get
qualify to get CPP, or if I only work 1 year in my whole life between the age of 18 to 65, still i will get some pension or not at retirement.
Chirag
There is varying eligibility criteria as to number of years of contributions for CPP disability and survivor benefits, but just one year of contributions will qualify you for a CPP retirement pension at age 65 (or as early as age 60). For a very rough estimate, each year of contributions at the maximum rate (YMPE) will generate a retirement pension at age 65 in the amount of $25/mth, up to the maximum yearly amount.
if i work there in canada at the age of 68 years and get maximum wage of 1500 canadian dollar per month how much will be deduction from my pay for cpp fund and how much for employement insurance.
and how i wll get on the completion of my 70 years age
About $3.76 per month and no OAS; how much would you get where you came from?
Why do you ask?
if i work 2 years at the age 69 and 70 with maximum wage of approximately cad 500 per week
how much will be deduction from my wage for cpp
conribution and employement insurance
And what pension i will get after retirement after 2 years at the age of 70
If i come to canada and work there for two years
at the age of 69 and 70 at maximum wage of approximately cad 500 per week. how much will be
monthly deduction from my pay for cpp contribution
as well as unemployement insurance
How much i will get on retirement at the age of 70 years
about $5.03. About $4.79. What would I get in your country?
If some on comes to canada and work there for 2 tears 3 monts at the age of above 67 years
and assuming if he gets a job of approximately 1500 canadian dollar per month how much wll be monthly deductions from his pay for cpp fund enemploement insurance income tax etc
Any body can advise .Furthermore will he get any
benefit during this period or at the age of 70
if i come to canada and work there for 3 years
at maximum wage of 2000 cad per month.how much will be deduction for cpp contribution as well as employement insurace.can any body advise
Furtheremore what benefit and how much i will get on my retirement after 3 years at the age of 70
at present i am 67
$74.12/month and yes, you can send it to Lebanon to your parents who get no pension at all. It’s not much but it pays for postage to apply for welfare
why should i send them to lebanon.if i pay something to any body it is my right to ask how much i will get otherwise why is deduction from wage.furthermore i belong to country which name is world and god has made this for all not only for you.i believe that one conrtibution is sufficient to be eligible for cpp fund and i have 3 more years to reach at the age of 70. so why should i not take advantage of it.
why should i send to lebonon
if there is no pension benefit for me at 70
there should not be any deduction from wages
i am sure you will agree with it
Yes, I completely agree. By the way; you’re not taking advantage of “it”; you’re taking advantage of Canada’s generous social programs which we can’t afford. Hopefully, this government will clamp down on welfare fraud and cut other unnecessary programs that people should avail themselves of on their own dime
Thanks you agreed. Why i am asking such silly questios. I twll you.
I am not as young as you I have limited time to work. overall every body has to become old. And if someone comes to canada in this old age,he will look for all options.such as job availability for retired old persons,their monthly income,their expenses,their health etc.
I hope you will not mind it. Advise me should i come to canada for setteling rest of life there
and are there chances that i can live without social assistance,in otherwords will i get some work which will give me such wages to survive myself without any social benefits
Hope you will realize my position and advise me
Thanks
my advice to you is to stay where you are. Where i s that? We have great unemployment in Canada and I doubt anyone over 60 is likely to get a job; too many young people in line…. Why do you want to come here? Why do you want to leave your country? (What country is that again?). If you decide to come anyway, perhaps I can find you accommodations
Let me know
Peter
no i dont need any help
I only wanted to know the difficulties which i will have to face if i come to Canada.Thank you for your advice anf favour
bye
I am Canadian, and contributed to CPP my entire working life, up until age 36, then i moved to the USA. When I retire, am i still eligable to collect the CPP that I contributed during the 18+ years that I lived/worked in Canada? What other benefits am i eligable for (Old age pension etc…) as a Canadian living in the USA? thanks very much!
)
Lillian
I agree with most of the points in Dave’s answer, except regarding the 20-year rule for OAS. That is the general rule, but Canada has international social security agreements with many countries (the USA being one of those countries), whereby you MAY be able to use contributions or residence in that other country to “totalize” your residence to meet the 20-year rule. I don’t know enough about the Canada/USA agreement to give you a definitive answer, but here is a weblink that may give you your answer: http://www.servicecanada.gc.ca/eng/isp/ibfa/countries/overview/usa.shtml
In any case, I would suggest that it’s worth applying when you near age 65, and as Dave says, the rules are constantly evolving.
Yes your CPP would be payable outside canada. I suggest you apply for a statement of contributions at;
http://consumerinformation.ca/app/oca/ccig/abstract.do?abstractNo=HR000005&language=eng
RE: OAS – Old Age Pension – The following is a quote from their website. Based on your situation no you would not be eligible to receive it outside Canada as you don’t have the reguired 20 years.
“Payment outside Canada: Once a full or partial Old Age Security pension has been approved, it may be paid indefinitely outside Canada, if the pensioner has lived in Canada for at least 20 years after reaching 18 years of age. Otherwise, payment may be made only for the month of a pensioner’s departure from Canada and for six additional months, after which payment is suspended. The benefit may be reinstated if the pensioner returns to live in Canada and meets all conditions of eligibility.”
Also please keep in mind that the OAS payments are currently under government review.
More information can be found at SERVICE CANADA websites
I agree with most of Dave’s answer, except for the part about OAS and the 20-year rule. While I agree that’s the “normal” rule, Canada has international social security agreements with many countries (including the USA), whereby you can use contributions (or sometimes residence) in another country to “totalize” and meet the Canadian requirements.
I don’t know enough about the Canada/USA agreement to give a definitive answer in your case, but here is a weblink that will give you some more details: http://www.servicecanada.gc.ca/eng/isp/ibfa/countries/overview/usa.shtml
I would further recommend that you apply for OAS when you’re nearing age 65 in any case, because the worst that they can do is deny your application. Good luck