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Here’s What You Need to Know
The Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) may be a significant source of income for you in retirement, but how much you get paid is unique to your situation.
Am I eligible?
If you are at least 60 years of age and made one or more valid contributions to CPP/QPP, then you are eligible to receive the retirement benefit. Even if you haven’t worked in Canada, you may be eligible as a result of receiving benefits or credits from a former spouse or common-law partner.
How much CPP/QPP will I get?
Every situation is unique, but currently the CPP/QPP amount is approximately 25% of pensionable earnings, up to a maximum amount. This amount is currently in the process of being increased over time.
For example, a Canadian resident who has a pensionable income of $50,000* and starts CPP/QPP benefits at age 65, could receive an annual CPP/QPP benefit of up to $12,500 ($50,000 x 0.25).
It’s important to note that as of 2019, both the CPP and QPP programs are being gradually enhanced. Both programs will provide higher benefits in exchange for making higher contributions, up to 33.33% of your pensionable earnings. The maximum pensionable salary amount will also increase over time.
Not sure what your pensionable earnings are? Visit My Service Canada to get an estimate of your CPP payments or view your Statement of Participation to see how much you’ve contributed to QPP.
What is the average payment per month?
The maximum monthly CPP payment in 2021 is $1,203.751. However, the average monthly amount for new beneficiaries is $619.75 (as of January 2021).1 That’s a difference you’ll want to consider.
The maximum monthly QPP payment in 2021 is $773.29 for people who start taking it at age 60, $1,208.26 for people who start at age 65, and $1,715.73 for those who wait until ages 70+ to receive the benefit.2
What factors affect my CPP/QPP benefit amount?
Whether you choose to start payments early, on time or late will have an impact on your benefit amount. The full benefit is available at age 65, but you can opt to take reduced payments as early as age 60 or increased payments at age 70.
Also, your contributions throughout your working years—both how much and how long you contributed—will have an effect on the amount you receive. The CPP/QPP calculation takes into account your best 40 years of earnings. While you’re eligible to receive the pension even if you contributed for just one working year, the more contribution years you have under your belt, the larger your payment will be—especially if you contributed significantly while working.
Working while receiving CPP payments
If you’re under 70, working and making contributions while receiving benefits, you may get an additional post-retirement benefit.
Contributions made after age 65
If you delay the CPP benefit and continue working after 65, you may get a larger payment. You can make QPP contributions until age 70, even if you’re still working. These additional payments could result in a permanent increase in your QPP retirement benefit.
Low or no salary periods
Your CPP payments are calculated using your highest 40 years of earnings—up to 8 of your lowest-salary years will be automatically excluded to help increase your payment. Similarly, a certain number of months where you had low or no salary may also be deducted from your QPP calculation.
Time off work to raise children
How much you were earning while caring for children under age 7 could increase your CPP benefits. Any time spent caring for children under 7 won’t be taken into account when calculating your QPP contribution, which could increase your benefit.
Disability periods
Any CPP disability payments you received won’t be considered when calculating your CPP benefit, which could increase your payment and help you qualify for other benefits. It is likely any QPP disability benefits you receive also won’t be a factor in calculating your QPP benefit, which could increase your benefit.
Sharing your pension
Pension-sharing with your spouse/common-law partner may reduce your taxable income and your tax bill.
Divorce or separation
CPP contributions split equally between partners in the event of divorce or separation could affect your contribution amount and eventual monthly benefit. QPP contributions split between partners could also affect your contribution amount and benefit.
Tip: CPP/QPP alone may not be enough retirement income so it’s important to compare your income and expenses in retirement to see how they stack up. See what other sources of income you may not have considered that could help you live comfortably in retirement.
Once you start taking CPP/QPP, you’ll receive payments monthly.
You’ll get a payment towards the end of each calendar month after you start receiving benefits and will have the option of doing a direct deposit or receiving a paper cheque in the mail. The amount you receive is taxable.
Let’s Start the Conversation
Want to know how to maximize the benefits of CPP/QPP? Talk to an RBC Financial Advisor Today!
What to Check Out Next
What is CPP and QPP?
How Do I Know When to Take CPP/QPP?
Knowing When to Retire
*
assumption that the person had constant pensionable earnings of $50,000 throughout their entire working life.
1
“CPP Retirement Pension: How Much You Could Receive.” Government of Canada. Employment and Social Development Canada (ESDC), March 31, 2021. https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html.
2
Retraite Québec. (n.d.). Amount of a Retirement Pension. Government of Quebec. Retraite Québec. June 11, 2021. https://www.rrq.gouv.qc.ca/en/programmes/regime_rentes/rente_retraite/Pages/montant_rr.aspx.