Canada Pension Plan Retirement Benefit
Mandated Basic Pension Plan (Updated for 2020)
Since 1966, Canadians between the ages of 18 and 70 and who earn more than $3,500 calendar year have participated in the Canada Pension Plan (CPP) or Quebec equivalent (QPP). The CPP is funded by employer and employee contributions and designed to provide a retirement pension is equivalent to 25% of a worker's average lifetime earnings, up to the Canadian average wage as adjusted each January. Enhancement targets were established in 2019 to increase the income replacement to one third of average work earnings.
Retirement pensions are calculated on the average of maximum pensionable earnings in the last 5 years and prorated for those who have worked few than 40 years with some adjustment for child-rearing and retiring earlier or later than age 65.
Benefit Amount (Updated for 2020)
The CPP disability pension benefit is calculated based on earning when the disability occurred rather than the projected retirement benefit.
- During 2020, the average monthly retirement pension benefit was $679.16 and maximum was $1,154.58 for a new recipient starting the pension at age 65.
Funding Method (Updated for 2021)
There is no government subsidy. The plan is funded with employee contributions and matching employer contributions. Those who are self-employed pay both the employee and employer contribution when they file their annual income tax return.
- During 2020 the CPP/QPP employee contribution is 5.45% of pensionable earnings to a maximum of $3,166.45 ($61,600 Year's Maximum Pensionable Earnings less $3,500 Year's Basic Exemption multiplied by contribution rate).
The employer's premiums are a tax deductible expense to the employer and are not added to the employee's taxable income. The employee's premiums are deductible from taxable income. C/QPP benefit payments are taxable income.