12/07/2010

Changes to the Canada Pension Plan

I came accross an article in The Globe and Mail who published on October 28, 2010,  that discusses upcoming changes to the Canada Pension Plan (CPP). I hadn't heard of any changes, so I started digging.  Before I share what I've learned, for my non-Canadian readers, The Government of Canada established the CPP program in 1966.

It is an earnings related social insurance program that provides basic benefits when a contributor to the plan (someone who is employed in Canada) retires or becomes disabled. When contributors die, the Plan provides benefits to their survivors. A CPP retirement pension is a monthly benefit paid to people who have contributed to the Canada Pension Plan. The pension is designed to replace about 25% of a person's earnings from employment, up to a maximum amount.

Commencing in January 2011, Canadians are about to see some significant changes to the Canada Pension Plan (CPP).

CHANGES

The following changes to the CPP will be phased in gradually between 2011 and 2016, with the first major change occurring in January 2011 for people retiring after age 65:
  • The monthly CPP retirement pension amount will increase by a higher percentage if taken after age 65
  • The monthly CPP retirement pension amount will decrease by a larger percentage if taken before age 65
  • A longer period of low earnings will be automatically dropped from the calculation of the CPP retirement pension
  • Contributors will be able to receive their CPP retirement pension without any work interruption.
  • If you are under 65 and you work while receiving your CPP retirement pension, you and your employer will have to continue making CPP contributions. (or if you work outside of Quebec while receiving a QPP retirement pension) These contributions will increase your CPP benefits.
  • If you are between the ages of 65 and 70 and you work while receiving your CPP retirement pension, you can choose to continue making CPP contributions. (or if you work outside of Quebec while receiving a QPP retirement pension)These contributions will increase your CPP benefits.
The government website states that these changes will improve retirement flexibility for working individuals in Canada, enhance pension coverage, and improve equity in the CPP.
Have you heard of these changes?  What do you think of them?

I think it's fantastic that you can continue working past age 65 (up to age 70) and continue contributing to CPP (with your employer contributing at the same time). 
Reactions:

4 comments:

  1. I don't plan on working that late in life. I'd really like it if I can get my hands on the CPP benefit before 65. But now that they are decreasing the amount you get before 65, I'll have to re-think what I'm planning to do.

    regards,

    Jason

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  2. I think it might depend on your age how one feels about the changes. I'm just 26 now - and people are living longer and longer. I imagine that I will work into my 70's.

    It might also help those that had savings deplete during the recession.

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  3. Thank you for the nicely itemized format of the changes. I knew there were changes coming, just wasn't sure aboout the details, thanks again.

    ReplyDelete
  4. I hadn't heard of these changes at all!

    I would love to retire around 55-57, so not sure how it'd impact my CPP if I chose to delay collect it a few years?

    ReplyDelete

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