Canada and Quebec Pension Plans

Changes are coming to the Canada Pension Plan and Quebec Pension Plan starting in 2019

Good news! The CPP/QPP income replacement rate will gradually increase from 25% to 33% of pensionable earnings, leading to higher pension benefits. In 2019, the maximum pension benefit is $13,855 per year, approximately 25% of the $57,400 maximum pensionable earnings.  

Starting in 2024, the maximum pensionable earnings limit will also go up with the addition of a “higher earnings” amount. This will benefit higher earners who will see more of their income-eligible for CPP/QPP contributions and further increase their retirement benefits over time. 

Good to know…
- It’ll take 40 years before the full increase is realized by anyone. 
- These enhancements will also apply to the disability benefit, survivor’s pension and post-retirement benefit, based on contributions made to the enhanced plans.

Higher benefits come at a cost
- Contributions will increase gradually to cover the added costs. 
- Additional contributions will apply to the “higher earnings” amount. 

 

The Canada/Québec Pension Plans (CPP/QPP) are earnings-related contributory benefit plans that were established to provide financial support to Canadians in their older age. CPP/QPP are intended to provide the following:

  • Retirement income
  • Surviving spouse’s pension
  • Disability pensions
  • Children’s benefits
  • A cash sum payable on death

You are eligible for the maximum payment at age 65 if you’ve made your maximum allowable contribution during your normal contributory period to CPP/QPP, exclusive of drop-out periods.

The normal contribution period is from age 18 until age 65. If you start collecting your pension before age 65, the payment will be reduced. If you defer collection, to after age 65, payments will be increased. Details of contributions and payments for the current year are outlined in the table below.

2020

CPP

QPP

This year, the year’s maximum pensionable earnings amount (YMPE) is:

$58,700.00

$58,700.00

This year’s basic exemption is:

$3,500.00

$3,500.00

Employee/employer contribution rate is:

10.25%

11.40%

Employee/employer maximum contribution is:

$2,898

$3,146

Self-employed maximum contribution is:

$5,796

$6,292

The maximum monthly income at age 65 is now:

$1,154.58

$1,154.58


The year's maximum pensionable earnings amount (YMPE) is indexed once a year in January to offset the effect of inflation.

If you are working in Quebec, you pay into the QPP. If you've contributed to both the CPP and the QPP, you apply to the QPP if you're living in Quebec at the time of your application, and to the CPP if you're living elsewhere in Canada. No matter which plan pays your benefit, the amount will be calculated according to your contributions to both plans.

What Happens If I Am Disabled?

The maximum disability benefit for adults is $1,387.66 per month under CPP and $1387.66 under QPP.

You can cancel your retirement pension up to six months after it starts, but you must request the cancellation in writing. You will also have to pay back all the monies you received and pay CPP/QPP contributions on any earnings you had while you were receiving the pension.

CPP/QPP Maximum Benefit

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In 2015, 30% of couples were concerned about social benefits like CPP, OAS and health benefits being reduced. Only 21% of these couples planned to address these concerns, while 79% did not.

Canada Pension Plan (CPP) Facts

1. No requirement to stop working

After reaching age 60, you may apply for and commence CPP payments even if you continue to work for your current employer. There is no longer a requirement to stop working.

2. The general low earnings drop-out is 17%

For individuals who start their CPP at age 65, up to eight of their lowest or zero earning years are removed from the calculation. This removal could result in higher average earnings and CPP retirement pension. The percentage is applied to the contribution period, which starts at age 18. The contribution period is 47 years at age 65 and 42 years at age 60. This change will also increase the average CPP disability and survivor pensions, which are based on the retirement benefit calculation.

3. Pension adjustments for early and late CPP commencement are different 

The early pension reduction is 0.6% per month for each month that the pension is taken before age 65, up to 36% for a person who begins collecting it at age 60. The late pension augmentation is 0.7% per month for each month that the pension is taken after the 65th birthday, up to age 70. This adjustment results in the pension being increased by 42% for a person who begins collecting it at age 70.

4. Working Canadians are required to make CPP contributions until age 65, even if they are receiving a CPP retirement pension

Those who are 65 years of age or older may elect not to continue contributing to the CPP. The Canada Revenue Agency (CRA) states that contributions made between ages 65 to 70 will go toward a post-retirement benefit, which will increase retirement benefits even for persons already receiving the maximum pension amounts.

Visit this page on the Service Canada website to make a request to view your CPP statement; you can also make this request by mail. The CPP statement of contributions will provide you with an estimate of your CPP retirement benefit. Check the accuracy of the statement since any discrepancy can affect the amount of your future benefit.

Québec Pension Plan (QPP) Facts

1. The contribution rate increases annually

2. Pension adjustments for early and late QPP commencement are different:

  • Before age 65: 0.6% per month maximum reduction (0.5% per month if born before January 1, 1954).
  • After age 65: 0.7% per month.

3. After reaching age 60, you may apply for and commence QPP payments even if you continue to work

4. Retirement pension supplement:

  • Working Quebecers are required to make QPP contributions, even if they are receiving a QPP retirement pension, once their earnings exceed the $3,500 basic exemption.
  • These contributions will go toward a retirement pension supplement, which will increase retirement benefits even for persons already receiving the maximum pension amounts.

Visit this page on the Régie des rentes du Québec website to make a request to view your QPP statement; you can also make this request by mail. The QPP statement of contributions will provide you with an estimate of your QPP retirement benefit. Check the accuracy of the statement since any discrepancy can affect the amount of your future benefit