The Canadian Pension Plan (CPP)
You will receive a monthly benefit from the Canadian Pension Plan (CPP) based on contributions that you have made into the plan, to a maximum of $986 per month in 2012. As a rule of thumb, if you earned over $48,300 in 2012, you and your employer made the maximum contribution for that year. CPP is taxable income and is paid to you from the time of your application, for the remainder of your life. Application can be made as early as age 60, though you currently need to earn less than $986 for two months prior to your application. This is referred to as the work cessation requirement. Don’t let the name fool you; you can start earning more again once you begin receiving CPP benefit. If you choose to collect at age 60, your benefits will be reduced. These rules are changing, and in 2012, pension at 60 will mean a total reduction of 36% of benefits, or an increase of 42% if you wait until age 70 to collect. The work cessation rule that kept your income low for two months prior to application will disappear as well.
To get a projection from Service Canada estimating how much you can collect during your retirement, click HERE and then click the red ‘Register Now’ button under “Don’t have an account?”. The account you are setting up is called your EPASS account. After registering, Service Canada will send you a PIN number in the mail. Once you’ve received this, you will have a limited amount of time to activate your account. When you log in, you will have to agree to their Privacy Notice Statement. You’ll then find yourself at the Service Canada Page that says “Welcome”, with your name at the top. Under the heading “Retirement Planning” in the lower right hand corner you’ll see a bullet titled ‘Estimate my CPP benefit’. After clicking on it, the next page will say “If you were 65 today you could receive a monthly benefit of _____”. Please keep in mind that this number is only based on contributions made to date. If it is low and you are younger, it’s due to the fact that you haven’t been contributing very long. If you have any difficulties with setting up an account or activating it, please call Service Canada at 1-866-372-7742.