(Article is based on information available at the time it was written: 2022-03-19)
What is CPP?
The Canada Pension Plan (CPP) is a taxable benefit that most Canadians are eligible to receive once they retire. The earliest age to start receiving the benefit is age 60. Most individuals start receiving it at age 65, some start receiving it at age 70. The CPP is administered throughout all provinces and territories in Canada except for Quebec (Quebec administers its own version called the Quebec Pension Plan –QPP).
How do I make contributions and how much should I contribute to CPP?
As an employee, you do not need to take any steps to contribute. CPP is a standard source deduction and the employer is required to withhold the CPP from their employee’s gross earnings when completing each payroll run and remit it to CRA. For 2022, the CPP rate is 5.70% and this amount is applied to the employee’s gross earnings. Employers are required to match the employees’ CPP contributions. For example, if an employee contributes $1,500 to CPP, the employer must also match that $1,500 contribution. The CPP rate is applied to any income earned over $3,500, up to a maximum of $64,900 for 2022. The maximum amount you can contribute to CPP in 2022 is $3,499.80. If you are self-employed you must contribute to CPP on your own and remit 11.4%. To summarize, the employer or payroll service provider (on behalf of an employer) will automatically make the CPP deductions/calculations and remit them to CRA.
Who needs to contribute to CPP?
While there are exceptions to who contributes to CPP, generally, any Canadian aged 18 to 65 makes the contribution through their employer/payroll service provider. You may contribute to CPP until the age of 70, after which you can no longer contribute, even if you continue earning “pensionable” income. You may elect to stop making CPP contributions at age 65 by completing the “CPT30” form and submitting it to CRA as well as to the employer/payroll service provider.
How much can I receive from the CPP benefit?
The amount you can expect to receive depends on a few factors including the age you start receiving the benefit, how much you contributed towards the CPP, how long you contributed to the CPP and your average earnings throughout your life. You must apply to receive this benefit as it is not administered automatically. The maximum a new recipient receiving the benefit at the age 65 in 2022 can be $1,253.59. The average amount that was paid to a new recipient at age 65 in October 2021 was $702.77. You can use the calculator in the link below to estimate how much you may receive: https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html