Requirements, benefits, and options
Contributions
The amount you contribute is based on your employment income.
You make contributions only on your annual earnings between a minimum and a maximum amount (these are called your pensionable earnings). The minimum amount is frozen at $3,500. The maximum amount is set each January, based on increases in the average wage in Canada.
In 2019, the maximum amount is $57,400. The contribution rate on these pensionable earnings is 10.2 percent, split equally between you and your employer. If you are self-employed, you pay the full 10.2 percent. The maximum contribution for employers and employees in 2019 is $2,748.90 each.
If you are self-employed, the maximum contribution is $5,497.80. Your contributions are based on your net business income (after expenses). You do not contribute on any other type of income, such as investment earnings. If during a year, you contributed too much or earned less than the set minimum amount, your contributions will be refunded when you file your income taxes.
Visit the Canada Revenue Agency website to find out more about CPP contribution rates, maximums, and exemptions.
Tax Treatment of Contributions
Employee contributions qualify as a tax credit. Your employer deducts its contributions. If you are self-employed, you receive a tax credit for one half of your contributions and a deduction for the other half against other business income.
Basic Benefits
Upon reaching the age of 65, you automatically qualify for benefits. These benefits are payable for life. The benefits are calculated based on your contributions over the years. You will qualify for the maximum available if you contributed the maximum every year. If you have several years of lower income, these years do not necessarily reduce the benefits receivable. In addition, there are exceptions for years raising children.
Early Retirement
You may collect CPP as early as 60. As a result of new rules beginning in 2011, your CPP is reduced by .6% for each month before the age of 65. If you take early CPP and continue to work, you will be required to continue contributing to CPP until age 65. You will get credit for these additional contributions and your CPP will be adjusted accordingly.
Late Retirement
You may also defer the receipt of CPP until the age of 70 if you continue to work and contribute. Your payments will be increased by .7% per month you defer payment after age 65.
Survivors Benefits
Upon the death of a CPP annuitant, the surviving spouse or partner is entitled to a portion of the deceased pension. The amount is based on factors such as age and contributions, but is approximately 60% of the deceased pension. Children under 18, under 25 and still in school or over eighteen, unmarried and disabled are also entitled to benefits.
Death Benefits
The estate of a deceased is entitled to a one-time lump sum benefit of no more than $2,500.
Disabled Individuals
Individuals with disabilities may be entitled to a disability pension if they are unable to find gainful employment. The pension converts to the regular pension at age 65.
Credit Splitting
If one spouse or partner is eligible for higher CPP benefits than the other, the higher benefits may be transferred to the lower beneficiary to a maximum of 50%.
You may obtain a schedule of contributions and expected benefits as well as more general information from Service Canada
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