The Canada Pension Plan (CPP) is one of the three main sources of retirement income for seniors in Canada.
CPP payments are made on a monthly basis and are paid out through direct deposit to your bank or sent as a cheque. The payment schedule varies from month to month but is generally on the third to last business day of each month.
CPP payment dates also coincide with when Old Age Security (OAS) pension benefits are paid out. You can read more about OAS vs CPP here.
In Quebec, the CPP-style program is known as the Quebec Pension Plan.
CPP Payment Dates for 2020
The Canada pension payment dates for 2020 are:
- January 29, 2020
- February 26, 2020
- March 27, 2020
- April 28, 2020
- May 27, 2020
- June 26, 2020
- July 29, 2020
- August 27, 2020
- September 28, 2020
- October 28, 2020
- November 26, 2020
- December 22, 2020
CPP payments include the CPP retirement pension, CPP disability, children’s benefits and survivor’s benefits.
OAS benefits are made out on the same dates and include the OAS pension, Guaranteed Income Supplement (GIS), Allowance and Allowance for the Survivor.
December payments are generally issued before December 25.
How Much CPP Will I Get?
Readers often ask me how much CPP to expect and why their payments are what they are.
The amount of CPP you get is based on your contributions to the plan. Basically, the more you contribute (and the longer you contribute), the more CPP you will qualify for in retirement.
Generally, to receive CPP, you must be at least 60 years old and have made at least one contribution to the plan. Most people will not qualify for the maximum CPP because they did not make the maximum contributions to the plan…for at least 39 years, that is.
Here’s a snapshot of the average and maximum CPP payments for 2020:
As you can see, the average CPP retirement pension benefit is $710.41 which is just over 60% of the maximum CPP amount of $1,175.83.
In order to receive the maximum CPP, you must have:
- Contributed to the CPP for at least 39 years of the 47 years from age 18-65.
- Contributed the maximum amount to the CPP for at least 39 years based on the Yearly Maximum Pensionable Earnings (YMPE).
The YMPE is the amount that is used to calculate the maximum contribution to the CPP/QPP each year.
For example, for 2020, the YMPE is $58,700, up from $57,400 in 2019.
This means that for 2020, you do not make any additional CPP contributions after reaching $58,700 in income for the year.
Using the numbers for 2020:
- YMPE = $58,700
- Basic exemption: $3,500
- CPP contribution rate (employee): 5.25%
- maximum contributory earnings: $55,200 (i.e. $58,700 minus $3,500)
- Maximum annual employee contributions in 2020: $2,898.00
YMPE over the years
- 2020: $58,700
- 2019: $57,400
- 2018: $55,900
- 2017: $55,300
- 2016: $54,900
- 2015: $53,600
For the YMPE numbers all the way to 1966 (when the amount was $5,000!), check here. The basic exemption amount has been $3,500 since 1996.
Assuming you earned and contributed CPP on an income that’s about 80% of the YMPE throughout your working years and you made CPP contributions for at least 39 years, it’s safe to say that you can expect to receive around 80% of the maximum CPP amount.
Provisions like child-rearing, low-income earning years drop-out, and disability drop-in/drop-out may increase your benefits.
Is CPP Taxable?
Yes, CPP payments are considered taxable income. The tax rate is based on your overall taxable income level. At the Federal level, the following income tax rate applies:
- <$48,535: 15%
- $48,535 – $97,069: 20.5%
- $97,069 – $150,473: 29%
- $150,473 – $214,368: 29%
- Over $214,368: 33%
Couples may choose to share their CPP benefits for tax-saving purposes. You must apply to Service Canada to share your pension and you can cancel at any time.
The amount of CPP you receive is not income-tested like the OAS and there is no clawback of CPP even if your income exceeds the OAS maximum income threshold (i.e. $128,137 for 2020).
CPP Benefits Increase (Enhancement) 2020
Changes were made to the CPP starting in 2019. While the CPP was initially designed to replace 25% of pre-retirement income, the long-term plan is to have the program replace 33.33% of your average lifetime earnings.
The full impacts of these changes are not expected to be realized until 2065.
A few things to note:
CPP contribution rates are increasing. For 2020, the employee/employer contribution rates increased from 5.10% to 5.25% (total of 10.50%) of earnings up to the YMPE. It will increase every year until it reaches 5.95% (11.90% total) by 2023 when it levels off.
Additional contributions will be phased in starting in 2024 at 4% of earnings above the YMPE up to a maximum amount.
For example, in 2024, you will contribute an additional 4% (8% total – 4% employer/4% employee) on income earned between the YMPE and $61,400 in 2019 dollars.
Overall, seniors will receive a higher CPP going forward and the full impact of the increased CPP will be felt about 4.5 decades from now.
Additional CPP Benefits
In addition to the retirement pension, CPP beneficiaries and their spouse or dependents may also qualify for:
1. Post-Retirement Pension
While collecting CPP, you can continue to work and make CPP contributions. These additional contributions are paid out as a post-retirement benefit and increase your overall pension.
You can no longer make a CPP contribution after age 70. CPP contributions are voluntary between the age of 65 to 70.
2. CPP Survivor’s Pension
This benefit is paid out to the legal spouse or common-law partner of a deceased CPP contributor.
The total CPP benefit that can be received (i.e. retirement pension, disability pension and survivor’s pension) cannot exceed the maximum CPP retirement pension ($1,175.83 in 2020).
3. CPP Disability Pension
CPP contributors who have a “severe and prolonged” disability may qualify for the CPP disability pension and post-retirement disability benefit.
Their dependent children may also qualify for a children’s benefit.
4. CPP Death Benefit
A lump-sum benefit of $2,500 is paid out to the estate of a deceased CPP contributor. To apply, you must complete Form ISP1200 and mail it to Service Canada.
5. CPP Children’s Benefit
Monthly benefits are available to dependent children of a deceased or disabled CPP pensioner. The child must be under age 18 or under 25 if in school full-time.
The maximum monthly children’s benefit for 2020 is $255.03.
What Happens To CPP After Death?
After a CPP pensioner dies, their spouse may be eligible for additional benefits i.e. the survivor’s benefit as explained above, and children under age 25 could also receive a children’s benefit.
The survivor’s pension varies depending on how much the deceased contributor made to the plan, as well as the age of the living spouse.
If the spouse is under 65 years old, they get 37.5% of the retirement pension of the deceased contributor plus a flat-rate amount. If the spouse is 65 years and older, they receive 60% of the deceased contributor’s retirement pension.
The living spouse or common-law partner can only receive a total combined pension benefit that is up to the maximum retirement pension ($1,175.83 in 2020).
So, if you are already receiving the full CPP, your survivor’s benefit falls to zero.
The deceased contributor’s estate may also be eligible for a death benefit of $2,500 to help with funeral expenses.
If a CPP pensioner dies before they can apply for the CPP, the following applies:
- Their estate can submit an application to receive up to 12 months of retirement pension. This is only possible if they were over 70 and the application was submitted within 12 months of death.
- Their estate, spouse or next-of-kin can still apply for the death benefit.
- Their spouse and children can still apply for the survivor’s pension and children’s benefits.
What Happens To CPP If You Move Abroad?
CPP payments are not subject to the 20-year residency requirements that apply to Old Age Security. Regardless of where you live in the world, you can receive your CPP pension.
Payments are either made in the local currency or in Canadian dollars.
If you are deemed by CRA to be a non-resident of Canada for tax purposes, a 25% withholding tax rate applies to your benefits.
If you live in a country that has a tax treaty with Canada, the tax withheld may be reduced or waived altogether (e.g. if you live in the U.S.).
What is the Best Age to Collect CPP?
Should I collect CPP at age 60? There are no hard and fast rules for when to start collecting CPP payments.
Some factors to consider are:
- Do you need the money now?
- Your expected lifespan
- Current income levels and plans to continue working
- OAS clawback considerations
The longer you wait to collect, the more pension you receive. However, waiting beyond age 60 is not always a better decision. I would advise you to discuss your overall financial situation with a financial planner to determine what’s best for you.
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Canada Pension Plan FAQs
A few other questions I’m frequently asked by readers are:
The maximum monthly CPP is $1,175.83. This makes for an annual pension of $14,109.96.
CPP benefits are adjusted every January to account for the inflation rate (i.e. Consumer Price Index). For example, in 2019, the amount increased by 2.3%.
In addition, CPP pensioners started to see increases in their payments starting in 2019 due to changes announced in the 2016 Federal Budget. The full impact of the CPP enhancement won’t be realized until 2065.
The standard age to start collecting CPP is 65. You can opt for an early CPP starting at 60 years of age. In this case, your benefits are decreased by 0.60% each month (7.2% penalty per year).
Alternatively, you can delay CPP till age 70 and receive an increase of 0.70% per month (8.4% increase per year).
If you started contributing to the CPP later in life or simply want to increase your retirement benefits, working and contributing to the CPP after 65 may make sense. However, contributions to the CPP are not required after you turn 65.
If the CPP pensioner made eligible contributions, their estate (or spouse/next-of-kin/estate executor) may be eligible for a $2,500 death benefit.
A surviving spouse can apply for a survivor’s pension. The amount you receive will depend on how much was contributed to the plan, your age, and the other pension benefits you are already receiving.
If you have questions about CPP payments and amounts, leave them in the comments.