The Canadian government sets the year’s maximum pensionable earnings (YMPE) figure. We can tackle disability benefits and other benefits in future articles. For the purposes of this post, we’ll focus on CPP as an income stream for retirement. No matter how often you change jobs or where you work in Canada, your contributions may help you or your family become eligible for a retirement pension, post-retirement benefits, disability benefits and any retirement survivor/CPP death benefits. If you are self-employed, you make the whole contribution. If you have an employer, you pay half the required contributions and your employer pays the other half. Essentially, this contributory program is ensuring you have some sort of a retirement income plan. With very few exceptions, every person over the age of 18 who works in Canada outside of Quebec and earns more than a minimum amount ($3,500 per year, a basic exemption amount) must contribute to the Canada Pension Plan (CPP). The amount of your CPP benefit is based on your average earnings throughout your working life, subject to contribution limits. The government does not guess when you want to take your income benefits. The short answer is, yes, since CPP payments are not automatic. Payments from OAS come from general tax revenues. This makes CPP very different from another government benefit, Old Age Security (OAS). That means your income stream from CPP depends on how much you put into the plan (to a maximum contribution amount) AND how long you’ve contributed to the plan. The biggest thing to know: CPP is a contributory plan. Essentially, valid contributions can be either from work you did in Canada or as the result of receiving credits from a former spouse or former common-law partner.
We’ll talk about the contributions in a bit.
The Canada Pension Plan (CPP) is a retirement pension, that is paid monthly, but it’s a taxable benefit that is designed to replace part of your employment income when you retire. We’ve got those questions above covered and much more in today’s post! Canada Pension Plan 101 That said, for many Canadians, CPP is a major retirement income source and one we’re planning on using effectively and efficiently. Readers of our site will know we’re many years away from taking our Canada Pension Plan (CPP) benefits.
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