Understanding Changes to the Canada Pension Plan | BELONG

Understanding Changes to the Canada Pension Plan

The Canada Pension Plan (CPP) is a taxable, inflation-protected public pension for wage earners and their families. It provides retirement, disability and survivor pensions. Payments from the plan are determined by contributions from earned income. The normal age for the CPP Retirement Pension is age 65, for which the maximum benefit in 2011 was $960 per month. You may apply to start receiving the benefit as early as age 60. If you start in a month other than your 65th birthday, the benefit is adjusted for each month prior to or after that date.

What is changing?

The CPP Retirement Pension is changing and below are some of the changes that may affect our members.

Change #1: From 2011 to 2016, the monthly payment is being adjusted according to the following table:

CPP Retirement Pension Adjustment – Monthly Percentage Increase

YEAR	BEFORE AGE 65	AFTER AGE 65

Up to 2010	0.50%	0.50%
2011	0.50%	0.57%
2012	0.52%	0.64%
2013	0.54%	0.70%
2014	0.56%	0.70%
2015	0.58%	0.70%
2016+	0.60%	0.70%

The following table illustrates how these adjustments may affect a contributor’s CPP Retirement Pension, depending on his or her age and the year in which the pension starts.

CPP Retirement Pension Starting Amounts (Based on 2010 Average Benefit)

YEAR	60^TH	65^TH	70^TH

Up to 2010	$359	$512	$666
2011	$337	$512	$668
2012	$316	$512	$709
2013	$297	$512	$728
2014	$297	$512	$728
2015	$297	$512	$728
2016+	$297	$512	$728

The amounts are based on the average 2010 CPP Retirement Pension of $512.33 per month. They do not include any adjustments for inflation.

Change #2: Prior to 2012, a contributor’s earned income had to be below the age-65 CPP maximum amount to qualify for the Retirement Pension. As of January 1, 2012, this rule is removed.

Change #3: Prior to 2012, once a contributor started receiving the CPP Retirement Pension, he or she could not make contributions to the plan. As of January 1, 2012, contributions will be mandatory for wage earners until age 65, whether or not they are receiving a CPP Retirement Pension. From age 65 to 70, wage earners may elect not to make contributions. These contributions will create a “Post Retirement Benefit” (PRB) – an additional payment of up to 2.5% of the normal (age 65) maximum per year of contribution.

Why is the CPP Retirement Pension changing?

The average age of the Canadian population is increasing: each year, greater numbers of people are retiring and living longer. Therefore, CPP is paying more retirees while receiving fewer contributions from wage earners. These changes are necessary to help manage the plan’s increasing liabilities.

Why is this important?

For many people, the CPP Retirement Pension is a key source of income in retirement. These changes may affect your choices about when and how to use this benefit effectively. Consult a Certified Financial Planner or your Credit Union financial advocate to learn more about the CPP Retirement Pension, assess your retirement options, and make informed decisions. We C.U.™ so you can make the best out of your retirement.