Lisa MacColl is a writer, investor and former compliance consultant in the group retirement and individual wealth management fields. Lisa has written about personal finance for 14 years and currently writes about investing and investment providers for Wealthsimple. Lisa's past work has been published in Canadian Money Saver, Advisor’s Edge, CBC, and CreditCards.ca. She was a nominee for the 2015 Oktoberfest Women of the Year, Professional Category. Lisa holds an M.A. and B.A. from the Wilfrid Laurier University.
The Canada Pension Plan (CPP) is a government-led retirement program that launched in 1965 to help add a little more shine to your golden years. It was originally meant to provide you with 25% of your pre-retirement income, but thanks to something called the CPP Enhancement, which started being phased in in 2019, you can now contribute more to your CPP in order to have a larger pension — up to 33% of your pre-retirement income.
Unless you live in Quebec, which has its own Quebec Pension Plan (QPP), if you’ve made more than $3,500 a year, you’ve paid into the CPP (and so has your employer, at a very generous — if government-mandated — 50% share). Once you hit 60, you can start collecting your pension payments. Depending on your financial situation, however, you may not want to get your CPP payments right away. That’s because, for every year you wait, your CPP payout increases. You reach the maximum amount when you hit 70, so if you can make it that long, it’s often best to wait.
CPP Payment Dates
CPP payments are made near the end of every month. For 2023, those dates are:
January 27, 2023
February 24, 2023
March 29, 2023
April 26, 2023
May 29, 2023
June 28, 2023
July 27, 2023
August 29, 2023
September 27, 2023
October 27, 2023
November 28, 2023
December 20, 2023
As for how much your CPP payment will be, that depends on two main factors: how much you earned and how old you are when you begin taking your pension.
Who pays into the CPP?
In 2023, employees over the age of 18 who earn more than $3,500 per year must pay CPP. (As we mentioned above, if you live in Quebec you'll pay into the QPP, which has a slightly higher rate.) CPP contributions are split equally between employer and employee, based on the employee’s income up to a maximum set by the federal government. If you make more than $66,600 in 2023, you’ll contribute the maximum amount to CPP.
What is the max CPP contribution in 2023?
To receive the maximum CPP payment, you need to have made the max CPP contribution each year for at least 39 years. The maximum employee contribution changes each year; in 2023 it is $3,754.45, or 5.95% of your salary (less a $3,500 exemption), whichever is more. For self-employed people — who pay both the employer and employee contributions — the maximum CPP contribution is $7,508.90.
What is the max CPP payment in 2023?
In 2023, the maximum CPP payout is $1,306.57 per month for new beneficiaries who start receiving CPP at 65. Although the max CPP payout is substantial, not everyone gets it. The average CPP in October 2022 was a much lower $717.15 per month, after all. This is because not all people have contributed enough over their lifetimes to receive the full CPP payment.
How much CPP will I get?
The amount of CPP you receive each month upon retirement is based on your contributions during your working life. The way CPP works is very simple. When you contribute to the Canadian Pension Plan, your money goes into a fund that’s used to pay out CPP in your retirement.
The CPP payments you receive can be shared with a lower-income spouse or partner. They can be split in the case of relationship breakdown, and if one spouse or partner was out of the workforce, or worked part time, there is a provision for “child rearing” that will exclude the lower earning years from the CPP payment calculation, effectively increasing the CPP payment you can receive. CPP is considered income and fully taxable at your marginal tax rate. To avoid a big tax shock at the end of the year, you can request that income tax be deducted from each payment.
How to maximize your CPP payment
You can start taking CPP at age 60, but you will lose up to 36% of your pension permanently if you take it that early. This is because CPP payments are reduced by 0.6% for every month before your 65th birthday you start taking your CPP. If you started on your 60th birthday, that would mean a reduction of 7.2% per year (12 months/year x 0.6% per month), which can be a substantial amount of money.
Conversely, if you delay receiving your CPP until age 70, your payments will be permanently increased by 0.7% for every month after your 65th birthday you delay, or 8.4% per year. That means if you delay CPP until age 70, you will receive 42% more than someone who starts taking payments at 60. Despite those numbers, most people start receiving CPP the month after their 65th birthday. And no, you can’t just keep waiting and pumping up your payments. There’s no further increase after age 70.
Your CPP pension amount is based on how much you contributed and how long you paid CPP. There is a “general drop-out” provision that excludes certain months with low earnings, and if you were out of the workforce for a number of years due to child care duties, or you worked part time, you can request a “child rearing” consideration. You can get more information here.
Average and maximum CPP monthly payments
The average CPP payment for beneficiaries who receive their first payment at 65 years old as of October 2022 is $717.15, as mentioned above. Of course, there are other scenarios possible, such as survivor or disability benefits.
As we mentioned before, to receive the maximum CPP, you would have to be making the maximum CPP contribution for 40 years. The federal government sets the Year’s Maximum Pensionable Earnings (YMPE) every year. That number is the basis for both CPP and pension contributions. In 2023, the YMPE is $66,600. Here's a helpful chart:
|Type of pension or benefit||Average monthly amount for new beneficiaries (2022)||Yearly average amount||Monthly maximum amount (2023)||Yearly maximum amount (2023)|
|Retirement pension, age 65||$717.15||$8,605.80||$1,306.57||$15,678.84|
|Retirement pension, delayed to age 70||$1,018.35||$12,220.20||$1,855.33||$22,263.96|
Average OAS monthly amounts
Old Age Security (OAS) is a pension given to Canadians over 65. The amount you receive each month is determined by how long you have lived in Canada after the age of 18. Payments are based on your marital status and level of income, and the maximums are calculated quarterly. The maximum monthly OAS for the first quarter of 2023 is $687.56 for people 65-74 years old and $756.32 if you're 75 or older.
Guaranteed income supplement for low-income Canadians
Guaranteed Income Supplement (GIS) provides a monthly non-taxable top-up to Old Age Security. GIS is income-tested. The next year’s payment will be calculated based on the net individual or family income reported on your income tax return. You can get more information on GIS here.
|Situation||Maximum monthly GIS amount||Maximum annual income to receive GIS|
|If you're single, widowed, or a divorced pensioner||$1,026.96||$20,832 (individual income)|
|If your spouse receives full OAS pension||$618.15||$27,552 (combined income)|
|If your spouse does not receive full OAS pension||$1,026.96||$49,920 (combined income)|
CPP & OAS eligibility
You must apply for CPP. It does not start automatically. To qualify for CPP, you must:
Be at least 1 month past your 59th birthday
Intend for your CPP to start within the next 12 months
Have worked in Canada and made at least one valid CPP contribution
Service Canada can automatically enroll some people in OAS, but not others. They’ll let you know if you’ve been automatically enrolled. Otherwise you’ll have to do it yourself (here’s the site). Unlike CPP, OAS is completely funded by the federal government, and you do not pay into it directly.
To qualify for OAS, you must:
Be 65 or older
Have lived here at least 10 years since turning 18, if you currently reside in Canada
Have resided in Canada at least 20 years since turning 18, if you currently reside outside of Canada
Be a Canadian citizen or legal resident at the time your application is approved, or before you left Canada to reside elsewhere
You can receive the maximum OAS payment if you’ve lived in Canada for at least 40 of the 47 years between your 18th and 65th birthday.
OAS is considered income and is fully taxable at your marginal tax rate. OAS is income-tested, which basically means the government is watching you. If you make more than a certain amount of income in a year, the CRA is coming for its money. (Your OAS distributions will be reduced, or “clawed-back.”) If your income is more than $129,757, congratulations: you do not qualify to receive OAS.
Is CPP alone enough for retirement?
Based on the most recent figures, if you're over 75 and you receive the average CPP payment plus the maximum OAS, you will receive $1,473.47 per month. That’s $17,681.64 per year, before taxes. If these means of public retirement income are your only sources of income, then you may also qualify for some GIS. You can get an estimate of how much you might need to retire by using our free retirement calculator. The calculator will also tell you if you’re saving enough for retirement or if you should aim to put away a little more money.
If you live very simply and your house is paid for, you might squeak by on CPP and OAS alone. When CPP was created, most workers stayed working for the same employer their entire career. Along with never having to learn a new work phone number, that also meant getting a company pension plan when they retired (and probably a gold watch). Now, however, many employers no longer provide pension plans, and employees rarely stay with the same employer their entire working life, so it’s good to have a backup plan. What kind of backup plan? A TFSA or an RRSP would be good. Or even both.
Frequently Asked Questions
The Canada Pension Plan (CPP) is a monthly, taxable pension benefit designed to help replace part of your income after you retire. If eligible, you can start drawing CPP at age 60 for a reduced benefit, 65 for the full benefit, and 70 for an enhanced benefit.
You can apply for CPP retirement benefits either online or through a paper application. If you submit a paper application, it generally takes up to 120 days to receive a written notification of decision.
Applying online is muuuuuch faster, with a notice of decision received between 7 and 14 business days after application. You need a My Service Canada Account to do so, and you’ll receive an estimate of your benefits upon filing your application.
Your CPP payment is based on how much you paid into the program over your working life and how old you are when you begin receiving the benefit. For 2022, the maximum starting pension for a new retiree at age 65 is $1,253.59/month. The average amount paid out to new retirees at 65, however, is $702.77/month.
You can find out how much you’re on track to receive from CPP using the Canadian Retirement Income Calculator provided by Service Canada Centres.
CPP income is indexed to the Consumer Price Index (CPI) All-Items Index. Every January, benefit rate increases are calculated to make sure CPP retirement benefits keep up with cost of living increases. For 2022, CPP was increased from an average of $689.17 in 2021 to $702.77.
OAS payments are based on how long you lived in Canada after age 18. For January to March 2022, the maximum monthly OAS payment is $642.25. All seniors over age 75 will also receive an automatic 10% increase in monthly OAS benefits from July 2022 onward.
CPP deductions are based on a percentage of your income up to the maximum pensionable earnings minus the 2022 basic exemption amount of $3,500. For 2022, the maximum pensionable earnings was $64,900.
Up to that maximum, you pay 5.70% of your income into CPP. For those at or above the maximum pensionable earnings, the 2022 contribution would top out at $3,499.80.
There are numerous mental and physical conditions that qualify you for the CPP disability benefit. The current criteria are:
You are under age 65.
You’ve made sufficient contributions to the Canada Pension Plan.
You have a mental/physical disability that regularly stops you from doing any substantially gainful work.
You have a disability that is long-term or of indefinite duration, or one that is likely to result in death.
You can apply for the CCP disability benefit either online or through submission of a paper form. Whichever application method you choose, you should expect to wait up to 120 days for a decision to be made and communicated to you.
If you die before you receive your CPP benefits, the state will pay a death benefit to your beneficiaries. Your spouse is automatically registered as your beneficiary unless they waive their rights.
How your CPP is paid out depends on whether you were working or already drawing CPP. If you die before your earliest retirement age, your beneficiary can choose between:
An immediate monthly pension payable for their lifetime
A lump-sum payment equal to the value of your contributions plus interest accrued, or the lump-sum commuted value, whichever is greater
If you die after your earliest retirement age, your spouse automatically receives the lifetime monthly pension.
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