Everyone wants to live a leisurely, easy-going, and comfortable life after retirement.
The key to planning a comfortable post-retirement life is to accumulate and invest enough when you are working.
To that end, it’s important to use all the tools at your disposal to plan a post-retirement life. Whether its learning how to buy stocks, or utilizing post-retirement pensions, you need a plan.
And this is where the Canada Pension Plan (CPP) comes in.
Below, we will quickly highlight the CPP payment dates for 2021.
However, this article doesn't only highlight CPP payment dates.
It also includes a complete guide to the CPP, one you won't want to miss.
CPP payment dates for 2021
Here is a CPP payments calendar for 2021:
- January 27, 2021
- February 24, 2021
- March 29, 2021
- April 28, 2021
- May 27, 2021
- June 28, 2021
- July 28, 2021
- August 27, 2021
- September 28, 2021
- October 27, 2021
- November 26, 2021
- December 22, 2021
What is the Canada Pension Plan?
Now that we've gone over CPP payment dates, lets look at what the CPP actually is. Keep in mind, the CPP is not OAS (Old Age Security.) Old age security is a payment made by the government to those who apply and meet particular requirements.
CPP is a retirement benefit scheme by the Canadian government that helps Canadians and their family earn a guaranteed monthly pension after retirement.
There are benefits for unfortunate circumstances such as the disability benefit and death benefit.
The way CPP works is quite simple. You keep contributing a certain portion of your income to the CPP while you are working.
In return, once you retire, you will get a certain amount every month from the government as a pension.
Every person over the age of 18 who works in Canada (except in the province of Quebec) and earns more than a minimum of $3,500 per year must contribute to the Canada Pension Plan.
If you have an employer, you pay half the required contributions and your employer pays the other half.
If you are self-employed, you make the whole contribution.
At the age of 70, you stop contributing to the CPP, even if you are still working.
How much do I contribute to the CPP?
The amount you contribute each month will depend on your earnings.
For instance, in 2021, the government has set the maximum CPP contributions at 5.45% of the employees’ gross earnings.
Since employers must match, it means another 5.45% of your earnings will be contributed by the employer.
So, overall 10.9% of your gross income will go towards the CPP in 2021.
The maximum pensionable earnings is set at $61,600.00 for the year 2021. Here’s a table that details CPP contributions for 2021:
CPP Contributions for 2021
|Maximum pensionable earnings||$61,600.00|
|Basic annual exemption||-$3,500|
|Maximum contributory earnings||$58,100.00|
|Maximum employee contribution||$3,166.45|
|Maximum employer contribution||$3,166.45|
How much CPP can you get?
Below is a table recreated by us from the Government of Canada website highlighting the average monthly and maximum CPP payment amounts.
How Much CPP Can You Get 2021
|Type of pension or benefit||Average amount for new beneficiaries (January 2021)||Maximum payment amount (2021)|
|Retirement pension (at age 65)||$736.25||$1,203.75|
|Post-retirement benefit (at age 65)||$8.04||$30.09|
|Post-retirement disability benefit||$510.85||$510.85|
|Survivor's pension - younger than 75||$452.28||$650.72|
|Survivor's pension - 65 and older||$316.91||$722.25|
|Children of disabled CPP contributors||$257.58||$257.58|
|Children of deceased CPP contributors||$257.58||$257.58|
|Death benefit (one-time payment)||$2,495.27||$2,500.00|
|Combined survivor's and retirement pension (at age 65)||$925.49||$1,203.75|
|Combined survivor's pension and disability benefit||$1,119.94||$1,413.66|
For 2021, the maximum monthly amount you could receive as a new recipient starting the CPP at age 65 is $1,203.75.
The average monthly CPP amount for 2021, however, is much lower at $689.17 per month.
This is because not all individuals have contributed enough to receive the full CPP payment.
The amount of your CPP payment and unlocking the maximum CPP depends on multiple factors. Let's take a look at a few of the most important ones.
CPP Payment Factor 1 -Age
One of these factors is the age you decide to start your pension.
The standard age to start the pension is 65. You can start taking CPP payments at the age 60 as well, but your monthly pension amount will decrease if you start receiving it before the age of 65.
The CPP payment amount is reduced by 0.6% for every month if you decide to take it before your 65th birthday.
So, for every year before your 65th birthday, you will lose 7.2% per year.
If you decide to earn CPP pension benefits at the age of 60, you will lose up to 36% (7.2*5 years) of your pension permanently.
Similarly, if you decide to start later, you’ll receive a larger maximum CPP payment.
For instance, if you delay availing your CPP until after the age of 65, your payments will be permanently increased by 0.7% for every month.
So, if you delay it for a year then you can earn 8.4% more per year. This means if you wait until the age of 70, you will receive 42% more.
However, this is the maximum CPP you can hope to get.
There’s no further increase after age 70. Your contributions will stop when you reach age 70, even if you’re still working.
CPP Payment Factor 2 - Contribution during working days
The amount you will receive out of your CPP payments also depends upon how much and for how long you contributed to the CPP.
To qualify for the maximum CPP payments you need to contribute to CPP for at least 40 years.
If you have some years of low or no earnings, CPP automatically excludes them while calculating the base component of your retirement pension and takes into account your best 40 years of earnings.
This effectively increases the amount of your pension.
How The CPP and Taxes Work
In every Canadian province except Quebec - which has its own Quebec Pension Plan (QPP) - individuals pay the CPP taxes on their wages.
As mentioned at the start of this article, this CPP amount is split between the employer and the employee.
This contribution to the CPP begins for every individual at the age of 18 and goes on till the age of 65.
The contribution stops if the individual worker has already begun receiving CPP payments or has died.
These contributions are placed into a fund managed by the CPP Investment Board which then invests these funds accumulated from Canadians in stocks, bonds, real estate, and various other asset classes.
CPP payments are considered taxable income, not capital gains, and are taxed as per your income tax bracket.
As per the Government of Canada's website, here are the Federal tax rates for 2021:
- 15% on the first $49,020
- 20.5% on the next $49,020
- 26% on the next $52,939
- 29% on the next $64,533
- 33% of taxable income over $216,511
This is why some households elect to share the income, which can reduce taxes. But, that is a topic for another article!
As always, the best course of action for tax information is to seek out a qualified tax representative.
Who is eligible for CPP?
You will be eligible for CPP if you are at least 60 years old and have made at least one valid contribution to the CPP.
Valid contributions can be either from the work you did in Canada, or the result of receiving credits from a former spouse or former common-law partner at the end of the relationship.
How to apply for CPP?
CPP benefits do not start automatically.
You must file an application with Service Canada to start your monthly pension.
You will be able to avail the CPP benefits only after your application is approved by the CPP board.
Note that even those with eligibility will not receive CPP automatically if they don’t apply to receive the CPP pension benefits.
If an application is denied, an appeal can be made to the Canada Pension Appeals Board.
Those living in Canada but residing in Quebec are not eligible for CPP benefits. This is because the provincial government of Quebec has opted out of the program.
Instead, Quebec offers its own retirement scheme Quebec Pension Plan (QPP).
What you need to apply for CPP
- Your Social Insurance Number.
- Your banking information if you want your payments directly deposited.
- Your spouse or common-law partner’s SIN.
The CPP has a child-rearing provision where you can request low-earning years to be removed from the calculation of your CPP benefits while raising your children.
To apply for this provision, you must provide the SIN or birth certificate of your children.
Two ways to apply for your CPP
There are two ways to apply for your CPP, either online or offline. And, we will cover both methods in this article.
However, if you're applying for CPP, you must complete and send a paper application if:
- You are receiving, have ever received, or have been denied a CPP benefit, such as disability pension, survivor’s pension or a children’s benefit
- You live outside Canada
- You have an authorized third party such as a power of attorney that manages your CPP account
Applying for CPP offline
To apply for your CPP by paper, download the application.
If you submit a paper application, it normally can take up to 120 days to get your written notification of decision. It could take longer if your application is missing information.
Remember to apply in advance to ensure that you start to receive your pension by the date you choose.
As stated above, you can complete the application online unless you fall into one of the mentioned categories.
Applying for CPP online
To apply online you’ll need a My Service Canada Account (MSCA).
If you don’t have a My Service Canada Account (MSCA), you can register for one. You’ll receive a personal access code to complete your registration.
Through MSCA, you can see an estimate of what you’ll receive in CPP payments.
After you submit your application, you’ll be immediately notified that your application has been received and will be assessed.
You should receive a notice of the CPP board in the mail between 7 and 14 days.
Recent changes in the CPP
The government has worked to improve the CPP with an aim to increase income of working Canadians post-retirement.
Given the fact that inflation continues to rise constantly, it was necessary to increase the monthly CPP payment offered in this scheme.
Additional motivation was provided by the Ontario provincial government, which launched the Ontario Retirement Pension Plan. This is a supplementary provincial pension plan to CPP.
Currently, the monthly retirement pension is equal to 25% of the average earnings on which CPP contributions were made over the entire working life of a contributor from age 18 to 65.
The earnings upon which contributions are made are subject to an annual limit. Under changes being phased in by 2025, CPP benefits will rise to 33.33% (from 25%) of earnings on which contributions were made.
Additionally, the maximum amount of income covered by the CPP will rise by 14% from the projected 2025 limit of $69,700 to $79,400.
The combination of the increased replacement rate and increased earnings limit will result in 33-50% higher pensions, depending on your earnings over the years.
Best time to apply for CPP
There are many factors that you should consider while deciding the age you want to start receiving your CPP retirement pension.
These include your overall health, your financial situation, and your plans for retirement.
For example, if you’re healthy, expect to live a long life, or have access to other sources of income, you may choose to start receiving your CPP retirement pension at 70.
This will result in a larger monthly pension, which could help protect you from outliving your savings.
However, if you prefer to work less, or you want the money now to pay off debts or to fund your retirement plans, you may choose to start receiving your pension before age 65.
This will result in a smaller monthly payment, but it can help meet immediate needs, especially if you have little or no other income.
You can get an estimate of your monthly CPP payments by logging into your My Service Canada Account.
If you don’t have an account, you can register for one. You’ll receive a personal access code to complete your registration.
The Canadian Retirement Income Calculator can also help you better understand your future financial security.
What happens to a pensioner's CPP if they leave the country?
A pensioner doesn't need to fear not receiving their CPP payments if they are thinking of moving abroad in retirement.
That is because regardless of where the pensioner lives, you can collect your CPP pension payments. In fact, they can even be paid to you in the currency of the country you reside in.
One thing to note however is that if the country you reside in does not currently have a tax treaty with Canada (for example, the United States) you may be subject to withholding taxes on that money.
Again, it is best to seek out a qualified accountant for this.
What happens to your CPP after you die?
If you die and still have eligible CPP payments, the surviving pension is paid to the person who, at the time of death, is the legal spouse or common-law partner of the deceased pensioner.
They call this the Survivor's pension.
If you are the separated spouse of the deceased and they have no common-law partner, you may actually qualify for the survivor's pension.
A unique rule to the survivor's pension is the fact that if you are widowed more than once, you will only receive the pension in which is larger.
So how much will you be paid in terms of survivor benefits? It's a relatively simple calculation.
If you are over the age of 65, you will receive 60% of the contributor's retirement pension if you are not receiving other CPP benefits.
If you are under the age of 65, you'll receive a flat rate portion, plus 37.5% of the contributor's retirement pension, if you are not receiving other CPP benefits.
Your survivor's pension will start at the earliest month after the contributor's death.
There is also a one time death benefit payment to either the estate of the deceased, or a surviving spouse or common-law partner of the deceased. As of January 2019, this payment was a flat rate of $2,500.