The Canada Pension Plan (CPP) is a social insurance program. It is funded via contributions from workers, employers, and self-employed citizens as well as returns from investments. Except for Quebec, which operates its own comprehensive scheme, the Quebec Pension Plan, the CPP includes practically all salaried and self-employed Canadians. When a contributor retires, becomes disabled, or passes away, their income is replaced by the CPP.
It offers the successors of the contributors some financial compensation in addition to a monthly, taxable amount to substitute your income from employment. This is an application-based program. You can apply for it if you meet the eligibility criteria.
When you become a part of this plan, you have to make contributions. Your money goes into a fund used to pay out CPP when you retire, or to your family in case of your demise. You will only ever use this money for your CPP payment, so it’s like an investment and saving for the future. Because the CPP is a social insurance program, there is a prevalent idea that it could fail. However, the federal and provincial governments altered the program in the past to ensure that it will continue for the present and future generations.
Benefits Of The CPP
You can be eligible for extra CPP benefits along with the retirement pension. Some of these benefits include:
1. Post-Retirement Benefits
You will receive post-retirement benefits (PRB) if you continue to work and pay into your CPP. You will still be receiving your CPP benefits, and you must fall under the age of 70. This benefit will raise your retirement income.
2. Disability Benefits
It’s a monthly payment for which:
- You must be under 65 years of age
- You must not be currently receiving your CPP
- You have a mental or physical disability (without having disability insurance) that consistently prevents you from engaging in any sort of significantly gainful job.
3. Pension Benefits For The Survivors Of A Deceased CPP Contributor
This is a benefit for people who were lawfully married to a dead CPP contributor or their common-law spouse.
4. Benefits For The Children
This is a benefit that pays dependent children of CPP contributors who are disabled or have passed away on a monthly basis.
5. Death Benefit
On behalf of a deceased CPP contributor, a one-time $2,500 payment known as the death benefit is made to the estate or other qualified parties.
Eligibility Criteria For CP
Although this is a social-insurance plan for the advantage of the entire community. However, there are a few conditions you must meet in order to be eligible for the Canada Pension Plan.
To be eligible to apply, you must make sure that you:
- Are at least one month older than 59
- Been employed for a while in Canada
- Made at least one legitimate CPP contribution
- Want CPP payments to start in a year
A legitimate CPP contribution can come from work you conducted while living in Canada or from credits you received from an ex-spouse after a relationship ended.
How To Submit A Canada Pension Plan Application (CPP)
To be eligible to receive the CPP benefits, you must submit an application. Due to the process time, the Canadian government advises that you submit the form before the date you want your pension benefits to start. Fortunately, there are only 2 steps to the application procedure, which makes it quite simple:
- Fill out the online form, then send it electronically.
- Sign the signature sheet after printing it, then mail it to Service Canada.
Your social insurance number and the necessary banking information must be available for the application. The online application will make this clear if additional supporting documents are required in addition to the signature page.
How Long Does It Take For The Application To Be Processed?
Due to the different processing times, the Government of Canada advises that you apply well in advance of when you expect to receive your first payment. After receiving your application form, Service Canada will start processing it.
- For online applications, it could take up to 7–14 days
- 120 days for the applications sent to Service Canada Centers
- 120 days for mail-in applications
- Incomplete applications might take longer to process because more information is needed
What Happens If Your Application Gets Rejected?
You need not be concerned about your request being rejected if you match the qualification criteria. However, if your application is turned down, you will have the chance to appeal to the Canada Pension Appeals Board and request that they reconsider their decision. They will let you know what conditions you don’t meet or if there is any missing paperwork you need to submit to get clearance. This is why it’s valuable to plan for retirement with life insurance or other financial products in case you don’t get any or much CPP payments.
When Can You Begin Receiving Benefits From The CPP?
Even while you can start receiving CPP benefits at age 60, you will not get as much money as you would expect. So, it’s better if you wait. You will be eligible for all benefits if you postpone until you turn 65. Delaying your benefits until you are 70 gives you access to additional advantages.
What To Take Into Account Before Collecting Your CPP?
Consider these factors when deciding when to begin receiving your CPP retirement pension:
- The impact of aging on your monthly payment
- Whether you intend to continue working while collecting a pension
- How much you have paid into the CPP and how long you have been doing so
- Your individual savings, investments, or pension plan at work
- Your retirement preparation and the retirement lifestyle you want
- Your present health, family medical history, and any afflictions you may have
- Whether you receive any additional money from rentals, businesses, or other sources.
Every situation is unique and necessitates thorough analysis. Even though it’s uncommon, some people prefer the concept of receiving the full government pension rather than doing it at a young age or when they turn 65. This is because they may have established a registered retirement savings plan (RRSP) to augment the CPP benefits they would receive. This way, they would be able to lock in a benefit that is 78% larger at age 70 than it would be if they took it at age 60.
But that’s not the only case. You may decide to receive the income earlier rather than wait. And that’s absolutely all right if you are making a well-informed, conscious decision.
From the age of 18 to 65, everyone who earns more than $3,500 annually is required to contribute to the CPP. Those who work past the age of 65 may choose not to do so.
Your CPP retirement pension’s amount is determined by a variety of elements, including:
- Your earnings before retiring
- The source of your income
- The number of years with poor/low income
- Time spent looking after young children
- The age you choose to begin receiving a pension
For instance, you would be eligible for the maximum CPP benefit if you worked for over 40 years at the “Yearly Maximum Pensionable Earnings (YMPE).” The maximum CPP benefit at age 65 for new beneficiaries is $1,253.59 every month for 2022. This benefit adjusts annually in January to reflect changes in the cost of living. Depending on how much money you need for retirement and how soon you decide to start receiving CPP benefits, this amount may change.