Second level - the Canada Pension Plan
The Canada Pension Plan (CPP) is funded through contributions made by Canadian workers, their employers and the self-employed, as well as through earnings on the investment of the Plan’s funds. CPP operates in every Canadian province and territory (except Quebec, which has its own similar plan called the Quebec Pension Plan) and provides a basic level of financial protection for CPP contributors and their families. The amount of pension a person receives depends on how much and for how long they have contributed and in some cases, the age the person chooses his/her payment to begin.
In addition to being a source of retirement income, CPP also provides contributors and their families with:
In total, the CPP paid over 4.1 million Canadians about $19.5 billion in benefits in 2001.
The Plan’s progressive features include:
Inflation protection:
CPP monthly benefits are adjusted every year based on changes in the Consumer Price Index. In other words, if the cost of living goes up, so does the amount of your benefits.
Full portability within Canada:
When you leave one job to go to another, or move your business to another province, your CPP coverage continues. Each new employer is responsible for making contributions to the CPP on your behalf if you are working for an employer. If you are self-employed, you can contribute in any province or territory.
Protection for periods of child-rearing or unemployment:
If you stopped working or if your earnings were lower while you were raising your children under the age of seven, you can have these periods removed from the calculation when you apply for your CPP benefits. This is only used if it will increase your benefit.
For more information, see Facts about the Child Rearing Drop-out Provision.
If you stopped working or if your earnings were lower in some years due to unemployment, underemployment, illness or schooling, the Canada Pension Plan will automatically remove up to 15% of these periods from your benefit calculation if it will increase your retirement pension or other CPP benefits.
Credit splitting
If you are separated or divorced, and if you qualify, you and your spouse or common-law partner can divide equally the CPP credits you both earned during your marriage or common-law union. This makes both of you eligible for a retirement pension and possibly other benefits.
For more information see Credit Splitting upon Divorce or Sparation.
- First level - the Old Age Security program
- Second level - the Canada Pension Plan
- Third level - private savings