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 was 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 during 2019, you can now contribute more to your CPP in order to have a larger pension — up to 33% of your pre-retirement income.
If you’ve made more than $3,500 a year (except if you live in Québec, which has its own Québec Pension Plan (QPP)), you’ve already paid into the CPP, and so has your employer, at the government-mandated 50% share. The good news is that once you hit 60, you can start collecting your pension payments. Depending on your financial situation, however, you may not want to take your CPP payments right away because for every year you wait, your CPP payout increases. As for how much your CPP payment will be, that depends on two main factors: how much you earned during your career and how old you are when you begin taking your pension. You reach the maximum amount when you hit 70, so if you can afford to hold off that long, it’s often best to wait. Here, we’ll explain the benefits and downsides to the different CPP timing options.
What are the CPP payment dates?
CPP payments are made near the end of every month. For 2024, those dates are:
January 29, 2024
February 27, 2024
March 26, 2024
April 26, 2024
May 29, 2024
June 26, 2024
July 29, 2024
August 28, 2024
September 25, 2024
October 29, 2024
November 27, 2024
December 20, 2024
Who pays into the CPP?
In 2024, employees over the age of 18 who earn more than $3,500 per year must pay into the CPP. (As we mentioned above, if you live in Québec, 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 $68,500 in 2024, you’ll contribute the maximum amount to the 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 2024, it is $3,867.50, 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 $7,735.
What are the pros and cons of deferring CPP?
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 from your 60th to your 65th birthday. So, 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).
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 that you delay the payment, for 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.
Most people would be financially better off waiting to collect CPP until age 70, or as close to that as possible, because:
During those years you’re not collecting, the investment and inflation risk is the government’s issue, not yours. CPP payouts are inflation-indexed. So, if we get periods of high inflation, your expected payout keeps pace. These payouts are also formulaic based on past contributions to the CPP; they aren't based on market returns. So, when markets go down, your income doesn't.
It provides longevity protection, since CPP pays until the end of your life. Because your pension is much higher if you take it at 70 than at 60, you start to "catch up" on money received and eventually reach a break-even point somewhere in your early to mid-80s. If you end up living into your 90s or beyond, you end up collecting considerably more from the government if you deferred your pension to 70 instead of starting it at 60. This is useful because the risk many retirees worry about is running out of money late in life.
CPP has a good implied rate of return (that’s the difference between the future rate and today’s rate).
So what’s the trade-off? That you have to spend more of your savings during the years you’re waiting to collect government benefits. If you can’t afford to wait, or you have poor longevity prospects, you might be better off claiming CPP as early as possible.
Is CPP taxed as income?
Yes, CPP is considered income and is 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.
Can I share my CPP with my partner?
Yes, the CPP payments you receive can be shared with a lower-income spouse or partner. They can also be split in the case of separation or divorce. If one partner was out of the workforce, or worked part time to take care of a baby or child, 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.
What are the average and maximum CPP monthly payments?
In 2024, the maximum CPP payout is $1,364.60 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 2023 was a much lower $758.32 per month. This is because not all people have contributed enough over their lifetimes to receive the full CPP payment, or because of scenarios 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 39 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 $68,500. Here's a helpful chart:
|Type of pension or benefit
|Average monthly amount for new beneficiaries (2024)
|Yearly average amount
|Monthly maximum amount (2024)
|Yearly maximum amount (2024)
|Retirement pension, age 65
|Retirement pension, delayed to age 70
What's the difference between CPP and OAS?
Old Age Security (OAS) is a pension that’s separate from CPP and is given to Canadians over 65. Here are some other differences.
It does not start automatically; you must apply for it. 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
Unlike CPP, OAS is completely funded by the federal government, so you don’t pay into it. 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).
To qualify for OAS, you must:
Be 65 or older
Have lived in Canada at least 10 years since turning 18, if you currently live in Canada; you must 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
Have income of $133,141 or less
Have lived in Canada for at least 40 of the 47 years between your 18th and 65th birthday (to qualify for the maximum payment)
OAS is considered income and is fully taxable at your marginal tax rate. OAS is income-tested, which means that if you make more than a certain amount of income in a year, your OAS distributions will be reduced.
Is CPP alone enough for retirement?
Based on the most recent figures, if you’re over 75 and you received the average CPP payment for 2023 ($760.07), that was $9,120.84 per year. That’s often not enough for most Canadians to comfortably retire. If you look at the average CPP payment for 2023 plus the maximum OAS ($756.32), you'd have received $1,516.39 per month. That’s $18,196.68 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.
If you live very simply and your house is paid for, you might squeak by on CPP and OAS alone, but it's good to have a backup plan. What kind of backup plan? A Tax-Free Savings Account or a Registered Retirement Savings Plan would be good. Or even both.
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.
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 seven 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 2024, the maximum CPP payout is $1,364.60 per month for new beneficiaries who start receiving CPP at 65, while the average CPP in October 2023 was a much lower $758.32 per month.
You can find out how much you’re on track to receive from CPP using the Canadian Retirement Income Calculator.
CPP income is indexed to the Consumer Price Index All-Items Index. Every January, benefit rate increases are calculated to make sure CPP retirement benefits keep up with cost of living increases. From 2022 to October 2023, CPP was increased from an average of $702.77 to $758.32 per month.
CPP deductions are based on a percentage of your income up to the maximum pensionable earnings minus the 2024 basic exemption amount of $3,500. For 2024, the maximum pensionable earnings was $68,500.
Up to that maximum, you pay 5.95% of your income into CPP. For those at or above the maximum pensionable earnings, the 2023 contribution would top out at $3,754.45. Not too bad of a security net for the golden years.
There are several mental and physical conditions that qualify someone for the CPP disability benefit. The current criteria are:
- You are under age 65
- You’ve made sufficient contributions to the CPP
- 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 (that's a harsh box to check)
You can apply for the CPP 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. But hopefully you’ll live a long, happy, healthy life where you use your CPP money doing things you love.
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