Your CPP retirement pension - what you need to know

How your CPP retirement pension is calculated

The amount of your retirement pension is based on your earnings and contributions to the Canada Pension Plan from the time you were 18 or from January 1966, whichever is later, up until you begin receiving your retirement benefits and the month you choose your pension to begin. The maximum CPP retirement pension for 2002 for a person who is 65 is $788 per month.

If you would like an estimate of what your retirement pension will be when you retire, you can complete an Estimate Request for a Canada Pension Plan Retirement Pension.

How your age affects your retirement pension

Your pension normally starts the month after your 65th birthday. However, you can take your CPP retirement pension as early as age 60.

The amount of your pension will depend on how much and for how long you have contributed to the Plan and when you want your pension to start. Your pension will be smaller if you take it before age 65 and larger if you take it after. If you wait to apply after age 70, you could lose some benefits.

Taking your retirement pension before age 65

If you take your CPP retirement pension before you are 65, it is reduced by 0.5% for each month that you are under 65 years old. For example, if you want your pension to begin the month after your 60th birthday, your retirement pension would be reduced by 30% (0.5% x 60 months).

Similarly, if you begin taking your pension the month after your 63rd birthday, the amount you receive would be reduced by 12% (0.5% x 24 months).

The maximum reduction is 30% since no retirement pension is paid before age 60. Taking your CPP pension before age 65 requires that you stop or reduce your earnings before your pension begins. Once you begin to receive your pension, you can return to any amount of paid work without affecting the payment. However, once you begin receiving your retirement pension, you cannot contribute to the CPP on any future earnings. For more information, visit Canada Pension Plan Retirement Pension.

Taking your retirement pension after age 65

Your CPP retirement pension is increased by 0.5% for each month after your 65th birthday that you delay taking the pension. The maximum increase is 30%. For example, if you want your pension to begin the month after your 67th birthday, your retirement pension would be increased by 12% (0.5% x 24 months).

You can also choose to receive up to 12 months in retroactive payments if you apply after age 65. The 0.5% increase in your pension, based on your age, would be adjusted accordingly. For example, if you apply at age 67 and request that your pension be paid retroactively to the month after your 66th birthday, the amount of your retirement pension would be increased by 6% (0.5% x 12 months).

You are not eligible for retroactive payments if you apply for your pension before age 65.

How your income affects your retirement pension

To get your retirement pension before age 65, you must:

A. Stop Working
Stopping work means that you are not working by the end of the month before the CPP retirement pension begins and during the month in which it begins. For example, if you request that your pension begins in April, you have to stop working by the end of March and you cannot work during the month of April.

OR

B. Have Low Earnings
Having low earnings means you are earning less than the current montly maximum CPP retirement pension ($788 in 2002) in the month prior to the month your pension begins and in the month it begins. For example, if you request that your pension begins in April 2002, you need to earn less than $788 in both March and April.

Once you receive your CPP pension, you can work as much as you want without affecting your pension payment. However, you cannot contribute to CPP on any future earnings.

Does staying home with my children for a few years affect my pension?

No, it doesn't as long as you apply for the Child Rearing Drop-out provision when you apply for a CPP benefit. This provision is only used if it will increase your benefit.

When you do not have income or have a lower income for a period of time, that means you make fewer or no contributions to CPP. If the reason you are not making an income or are making a lower income from work is to stay home with your children under the age of seven, then you can apply to CPP to have these periods excluded from the calculation of your pension. This will ensure the missing contributions do not reduce the amount of your pension.

How to share your retirement pension with your spouse or common-law partner

You and your spouse or common-law partner can share your Canada Pension Plan retirement pension(s) if you are both at least 60 years old and have both applied for your CPP retirement pensions. Sharing your pensions may result in income tax savings.

See Sharing your retirement pension for more details.

How a divorce or separation can affect the amount of your pension

If you are divorced or are separated from your spouse or common-law partner, you or your former spouse or common-law partner can apply to have your respective Canada Pension Plan credits split between the two of you. This is called "credit splitting".

Under "credit splitting", your respective CPP contributions while you were married or living together are combined and divided equally between you. If you were divorced or separated from more than one common-law partner during your life, you can apply for a credit split for each period of cohabitation.

Credit splitting can affect the amount of any future or current Canada Pension Plan benefits for both you and your former spouse or common-law partner.

Consult Credit Splitting for more details on who is eligible and how to apply.

How could Survivor Benefits help my family?

When a CPP contributor dies, CPP pays three kinds of Survivor Benefits:

To qualify for any or all of these benefits, you must have contributed to the CPP for a minimum number of years. Your spouse or common-law partner and children must also meet certain conditions.

Receiving a combined retirement pension and survivors benefit

If you are receiving a monthly survivors benefit from the Canada Pension Plan and you apply for your CPP retirement pension, you will receive a combined monthly benefit.

Similarly, if you are receiving your CPP retirement pension and you apply for a survivors benefit following the death of your spouse or common-law partner, you will receive a combined monthly benefit.

The amount of a combined survivors/retirement benefit is limited to the maximum retirement pension. For example, if you begin receiving a combined benefit in 2002, the most you will receive is $788 a month.

Important information:

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