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Canada Pension Plan (CPP) Retirement Benefit - Early, Late and Post-Retirement

There have been several revisions to the CPP retirement pension.  The changes do not affect the benefits of anyone who was collecting the CPP retirement benefits prior to 2012, unless they did not reach the age of 65 before 2012, and were still earning pensionable earnings after 2011.  Those collecting their pension prior to 2012 had to start contributing again in 2012 if they were earning pensionable earnings, and had not yet reached 65 years of age.

Election:  From age 65 to 70, an employee can elect to stop making further contributions to the CPP, by completing form CPT30 from CRA.  Once the form is completed, a copy must be given to the employer, and the original sent to CRA.  The election would take effect on the first day of the month following the month that the form is filed with the employer, so cannot be backdated.  The first day that the form can be completed is the day that the employee turns 65, so CPP contributions are still made for the birthday month.

Employers:  See T4 slip information for correct completion of the T4 slip when a CPT 30 has been submitted.

Revocation:  The election can be revoked by completing form CPT30 again, but not until the following calendar year.

Individuals who are age 65 to 70, are not employees, and only have self-employed earnings, do not file a CPT30.  They can elect to not make contributions to the CPP by completing Schedule 8 CPP Contributions and Overpayment and filing it with their tax return after the year is complete.  This election would take effect on the first day of the month indicated on Schedule 8.

Individuals who have both employment and self-employment earnings would file the CPT30 with their employer and CRA, which is effective for both employment and self-employment earnings.  If they became employed in 2014 and filed a CPT30 at that time, but want to opt out of CPP contributions on self-employment earnings prior to becoming employed, (only if not a Quebec resident), they would also complete Schedule 8 or Form RC381 Inter-provincial calculation for CPP and QPP contributions and overpayments, whichever applies, when they file their tax return for that year.  To be valid, an election that applies to 2014 must be filed on or before June 15, 2016.

These changes were included in Bill C-51, which received Royal Assent on December 15, 2009.

A person's CPP retirement pension is calculated as 25% of his average pensionable earnings during his contributory period.  The contributory period starts when he turns 18, or 1966, whichever is later.  The contributory period ends when he starts collecting the pension.  This is still true after 2011, although the contributions made subsequent to starting the pension will result in the receipt of post-retirement benefits (PRB).

Work Cessation Test - Removed

Before 2012, in order to qualify to collect the CPP retirement pension before age 65, a person must have reduced earnings for the month prior to collecting the pension, and the following month.

Starting in 2012 - the Work Cessation Test was removed.  No reduction in earnings has to take place in order to collect the benefits prior to age 65.

General Low Earnings Drop-Out

If a person starts collecting CPP at age 60, the contributory period is 42 years, and at age 65 would be 47 years.  However, adjustments are made to the contributory period and average pensionable earnings by "dropping out" certain periods of low income.  The general low earnings drop-out is calculated after the child-rearing drop-out and the exclusion of periods where the person is on a CPP disability pension.

Before 2012, there was a general drop-out of 15% of the contributory years which were low or nil for other reasons.  For individuals who started their CPP at age 65, this removed almost 7 years of low or zero earnings from the calculation.  This increased the average earnings and CPP retirement pension for every person.

Starting in 2012 -  increase the general drop-out rate to:

This change also increases the average CPP disability and survivor pensions, which are based on the retirement benefit calculation.

CPP Contributions When Receiving Retirement Pension

Previously, CPP contributions were no longer paid once a person was receiving a CPP retirement pension, or once the person was 70, whichever was earlier.

Effective January 1, 2012 - CPP retirement benefit recipients are required to continue to make CPP contributions until age 65.  Those age 65 to 70 are able to elect not to continue contributing to the CPP.

CPP Post-Retirement Benefit (PRB)

Canada Pension Plan s. 59.1

This will also affect those people collecting CPP retirement pension prior to 2012, if they continue to earn pensionable earnings after 2011.

Pension Adjustments for Early and Late CPP Take-Up

Canada Pension Plan s. 46(3.1), Canada Pension Plan Regulations s. 78.3

Early Take-Up of CPP Retirement Pension

Before 2012, when the CPP retirement pension was taken early, it was reduced by 0.5% per month for each month that the pension was taken before the 65th birthday.  The pension was reduced by 30% (5 years x 12 months x 0.5%) for a person who began collecting it at age 60.

Starting in 2012 the percentage amounts used to reduce the early taken pensions are being gradually increased.  The new factors are:

This would result in the pension being reduced by 36% (60 months x 0.60%) for a person who begins collecting it at age 60 after 2015.

Late Take-Up of CPP Retirement Pension

Before 2012, the late pension was increased by 0.5% per month for each month after the 65th birthday that the person waited to begin the pension, up to age 70.  The pension was increased by 30% (5 years x 12 months x 0.5%) for a person who waited until age 70 to start collecting it.

Starting in 2011 the percentage amounts used to increase the late taken pensions were gradually increased.  The new factors are:

This would result in the pension being increased by 42% (60 months x 0.70%) for a person who begins collecting it at age 70 after 2012.  This also applies for persons already eligible for the maximum pension amounts.

Deductions allowed where contributory period ends after age 65

If a person delays the start of their pension past age 65, then s. 48(3) of the Canada Pension Plan allows a dropout of the number of months past age 65 from your contributory period (over 65 dropout).  This is in addition to the low earnings dropout and any child rearing dropout that have already been applied.

This results in an additional dropout of an equal number of months of low pensionable earnings, from the total pensionable earnings.  So, the maximum number of years of low earnings that can be dropped out increases from 8 (low earnings dropout - see above) to 13 (low earnings + over 65 dropouts).

Thus, delaying the pension to age 70 combined with low or no contributory earnings after age 65 won't reduce the CPP retirement pension, because these months can be dropped out.  Working after age 65 with contributory earnings higher than your average contributory earnings should increase your pension, because you can drop out months prior to age 65 when you had lower than average contributory earnings.

CPP Retirement Pension Cancellation

Your CPP retirement pension can be cancelled up to 6 months after you start receiving it.  You have to request this in writing, and you must pay back all of the CPP income you've received.  See Canada Pension Plan - After You've Applied, on the Service Canada website.

For cancellation of CPP and OAS benefits on behalf of a deceased person, see Cancel Old Age Security and Canada Pension Plan Benefits on the Service Canada website.

Points to Consider

CPP Retirement Benefit After Leaving Canada

If you become a non-resident of Canada before or after you start collecting your retirement benefit, this does not affect your entitlement to the pension.  The early or late CPP take-up provisions still apply for a non-resident.

Other Resources

Calculation of your Canada Pension Plan (CPP) benefit - DR Pensions Consulting.  It was Doug Runchey, the owner of DR Pensions Consulting, who discovered that the CPP retirement pension related to the enhanced CPP is not being paid.

Video Tax News Life in the Tax Lane February 2022: re The case for deferring your CPP benefits is stronger than ever

TaxTips.ca Resources

Enhanced Canada Pension Plan

CPP Retirement Pension Calculator, which provides a comparison of the CPP pension you will receive, based on different starting dates.

Self-employed and filing a tax return more than 4 years late? This affects your CPP.

Help With Calculation of Your CPP Benefit

Who Pays CPP or QPP Contributions?

CPP and QPP Contribution Rates

Government of Canada Resources

Canada Pension Plan - legislation

Canada Pension Plan Enhancement

Service Canada Canadian Retirement Income Calculator - Use this if your earnings are changing significantly before you start collecting your CPP pension.

Canada Pension Plan Disability Benefits - Overview

Canada Pension Plan Post-Retirement Benefit (PRB)

Canada Revenue Agency - CPP working beneficiaries (working ndividuals age 60 to 70 who are receiving CPP or QPP retirement pension)

Service Canada: The Canada Pension Plan retirement pension

CPP and OAS monthly payment amounts and other statistics

Payment Dates for CPP, OAS, and other government payments

Revenue Quebec Resources

Enhancement of the Quebec Pension Plan

Retirement Pension Supplement - equivalent to Post-Retirement Benefit

Tax Tip:  This is a very personal decision, and must be tailored to your individual financial situation.

Revised: September 20, 2024