Canadian Pension Plan is a retirement income scheme offered by the federal government of Canada. Let’s understand in details what CPP is and how it works.
Social Security Schemes in Canada
It is important that every country gives emphasis on the social security of old age people. Most developed countries have a well-structured social security scheme to support the retired.
Canada, being one of the developed nations, established the CPP in 1965, as a complement to the Old Age Security (OAS) Plan.
CPP is the abbreviation of Canada Pension Plan which helps to replace the employment salary of the elderly and aids them in meeting their living expenses during retirement phase.
Eligibility to get CPP Canada
You must be 65 years or older. However, if you have special provisions such as disability or if you have lost someone before you reached retirement, then you can start your CPP by age 60.
You must have made at least one contribution into your CPP.
The pension payments will automatically be credited to your account. In order to receive CPP, you must apply in the ‘My Service Canada Account’ portal when you wish to start receiving pension payments.
If you have applied online, your applications will be processed within 1 to 2 weeks. If you have applied in offline mode, then it will take up to 120 days (4 months). You must include your Social Insurance Number (SIN) and details of the bank account where you need your pension to be credited.
If for some reason, your application is being rejected for unjust reasons, you can appeal it to the Canada Pension Appeals Board.
How does CPP work?
Most Canadians basically start contributing into their respective CPPs as soon as they start working. This can be directly deducted from the person’s salary. The employers are also required to contribute an equal sum into the CPP of an employee. The contributions made during the employment phase are then returned to the contributors during their retirement phase, as a monthly income stream.
CPP basically aims to replace 25% of your earnings and it is indexed to CPI. There are a number of factors that decide how much CPP you will receive. They are as follows:
- Age you start your pension
- How much you have contributed into CPP
- How long have you been contributing into CPP
- Your average earnings during the employment phase.
The maximum CPP one can receive in 2022 is capped at $1,253.59 per month or $15,043.08 per annum. In order to know your exact eligibility, you need to login to your ‘My Service Canada Account’.
Canada Pension Plan
Thus, CPP helps to positively impact the cash flow of the Canadian retirees, by being an apt replacement of their employment income.