The Canada Pension Plan (CPP) retirement pension is a taxable benefit that you replaces the monthly income after retirement. You must qualify to receive it. To qualify you must be at least 60 years old and made at least one contribution to the CPP. The contribution must be valid, this means, it must be either from your Canada employment, or credits from a former spouse or common law-partner, post the relationship.
The advised age to start the pension is 65. However, it is admissible to start the pension as early as 60 years of age, or as late as 70. The point to consider here is that if you start pension early, the monthly amount would be smaller. When you decide to start it later, you will be eligible to receive a large monthly amount.
In case, you apply for pension after you turn 65, you will be eligible for retroactive payments of the CPP retirement pension, for 11 months. You choose the start date to begin receiving the benefit. For CPP retirement pension, taken before 65, there is no retroactive payment.
What factors affect the Pension Amount?
Please know that you must apply in advance to start your pension. It is not something that starts automatically. The pension amount depends on the average earnings throughout the work life. This means the contributions depend on the earnings. The factors that modulate the CPP retirement pension amount are:
- The age you start your pension plan from.
- How long and how much have you contributed to the CPP so far.
- The average earnings calculated throughout the work life.
$1,203.75 maximum monthly amount, you are eligible to receive as a new recipient who is starting his pension at the age of 65. $614.21, is the average monthly amount recorded for October 2020. Your situation will determine the amount of pension you will receive each month. Different factors affect the pension amount:
- Contributions made after 65 years – If you work after the age of 65 years and yet, don’t receive the CPP retirement pension, then the period of low earnings, prior 65 would be automatically replaced with higher earnings after 65. This shoots up the pension amount.
- No salary or low salary – Up to 8 years of the lowest earnings are automatically excluded when the base component or the CPP retirement pension is calculated. This increases the pension amount.
- Child-rearing Provisions – CPP benefits are increased depending on your earnings for the duration of your children caring years. This provision may also open horizons and help you qualify for other benefits.
- Disability – CPP disability payment if offered to you, wouldn’t be included in the base component calculation of the CPP benefit. This will cause a spike in the CPP retirement pension and also help you qualify for various other benefits.
- Shared pension – pension sharing can lower the tax in your retirement, thereby decreasing the taxable income amount.
- Divorce or separation – In case of a split or divorce, the CPP contributions are split into two.
How long will it take for the Application Process to Complete?
Once the application form is completed, the application process is initiated. It would take:
- 7 to 14 days for online applications
- Normally within 120 days for applications delivered at a Service Canada Centre
- Normally within 120 days for applications sent by mail
In case, Service Canada Centre does not have a complete application, the processing time will be extended.
CPP Post-Retirement Benefits
- Disability CPP Post-Retirement Disability Benefit – In case you are eligible to receive the CPP retirement pension, and are under the age of 65, suffering from a prolonged disability, you are eligible for a CPP post-retirement disability benefit. You have to apply for this benefit.
- Children’s Benefit – In case of dependent children, under the age of 18 or between the age of 18 to 25, who are currently attending school full time, a monthly benefit is offered to the children.
- After Death
- CPP survivor’s pension – The CPP survivor pension and the retirement pension will be combined, in case, you receive the two. There are other rules applied over these two pensions.
- Children Benefit – Monthly benefit of deceased CPP contributor for the dependent children.
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