The Canada Pension Plan (CPP) is a key part of retirement planning for Canadians. Whether you’re nearing retirement, currently contributing, or just starting to think about your future, understanding how CPP works, how much you can receive, and when to take it is essential.
In this guide, we’ll break down who qualifies for CPP, how contributions are calculated, when you can start receiving payments, and strategies to maximize your benefits.
What Is the Canada Pension Plan (CPP)?
The Canada Pension Plan is a government-run retirement benefit program that provides monthly income to eligible Canadians after they retire. It is funded through mandatory payroll contributions from employees, employers, and self-employed individuals.
✔ Available to most working Canadians
✔ Provides retirement income based on lifetime earnings
✔ Can be taken as early as age 60 or delayed up to age 70
Who Is Eligible for CPP?
To qualify for CPP benefits, you must:
✔ Have worked in Canada and made at least one valid CPP contribution.
✔ Be at least 60 years old to start receiving payments.
✔ Apply for benefits—CPP does not start automatically.
If you are self-employed, you are responsible for both the employer and employee portions of CPP contributions.
How Much Will You Receive from CPP?
Your CPP payments are based on:
- Your average earnings throughout your working life
- How much you contributed to CPP
- How long you contributed
As of 2024, the maximum monthly CPP payment at age 65 is $1,364.60, but the average payment is around $758.32.
Want to estimate your future CPP benefits? Use the Canada Revenue Agency’s (CRA) My Account portal to check your contribution history and projected payments.
When Should You Start Taking CPP?
You can start receiving CPP as early as age 60, but your payments will be reduced if you take it before 65. Alternatively, you can delay your CPP benefits up to age 70, which increases your monthly payments.
Early CPP (Before 65)
- Payments are reduced by 0.6% per month (7.2% per year).
- If you take CPP at 60, your benefits will be 36% lower than at 65.
- Ideal if you need income sooner or have health concerns.
Standard CPP (At 65)
- You receive full benefits based on your contributions.
- Best for those who don’t need early income but don’t want to wait.
Delayed CPP (After 65, Up to 70)
- Payments increase by 0.7% per month (8.4% per year).
- If you delay CPP until 70, your benefits will be 42% higher than at 65.
- Great option if you have other retirement savings and a longer life expectancy.
How Is CPP Calculated?
CPP contributions are automatically deducted from your paycheck if you are employed in Canada.
CPP Contribution Rates (2024)
- Employees pay: 5.95% of earnings (up to $68,500).
- Employers match: 5.95% (total of 11.90% contributed).
- Self-employed individuals pay: 11.90% (since they cover both portions).
Once you reach the maximum pensionable earnings limit, you stop contributing for the year.
Additional CPP Benefits
CPP is not just for retirement—there are other benefits available under the program, including:
✔ CPP Disability Benefits – For those who become disabled and can no longer work.
✔ CPP Survivor Benefits – Financial support for spouses/common-law partners of deceased CPP contributors.
✔ CPP Death Benefit – A one-time payment to cover funeral expenses.
How to Apply for CPP
CPP does not start automatically—you must apply.
✔ Apply online through My Service Canada Account or by mailing a paper application.
✔ Applications should be submitted at least 6 months before you want benefits to begin.
✔ The first payment arrives the month after your chosen start date.
Final Thoughts
The Canada Pension Plan is a key source of retirement income for Canadians, but deciding when to take CPP depends on your financial situation, retirement goals, and life expectancy.
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