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So when should I start receiving my CPP benefits?

January 7, 2011 - 28 comments

With changes to the Canada Pension Plan being phased-in between 2011 and 2016, there is no easy answer to this question. New rules mean new factors must come into play:

If payments begin between age 60 and 65, the actuarial reduction will change. The reduction is made because payments are expected to be paid for more years. Before the changes, the maximum reduction was 30% (0.5% per month before age 65) if a pensioner started receiving benefits at age 60. The new phase-in amounts start in 2012 and are as follows:

The maximum reduction if pension is started at age 60 in 2015, would be 36% (0.60% x 60 months).

Assuming a maximum CPP benefit, and based simply on a cumulative total amount received, the “crossover” under the new rules would be reached at age 73 or 74. In other words, if you live past age 74, the cumulative benefit will be better if you start CPP at age 65 than at age 60. Here’s the chart:

If payments begin after age 65, monthly payments will be higher, since payments are anticipated to be paid for fewer years. Beginning in 2011 (note the different starting date than the reduction for before age 65) payments will increase by:

The maximum increase if pension is started at age 70 in 2013 would be 42% (0.7% x 60 months)

In this scenario, the crossover age is around 81. 


The drop-out provision in calculating benefits will change. This provision allows the exclusion of a portion of zero or low earnings from the contributory period (from age 18 until retirement). Starting in 2012, the number of years of low or zero earnings that are automatically dropped from the calculation of CPP pension will increase from the existing 15% (up to seven years) to 16% (up to 7.5 years) and in 2014 this will increase again to 17% (up to 8 years). 

Under current rules, if CPP is taken before age 65, the pensioner must have substantially ceased working in order to collect. This Work Cessation Test will no longer apply, starting in 2012.

A new Post-Retirement Benefit is being introduced, starting in 2012. Under current rules, once CPP payments start, they will not change if the pensioner returns to work – new earnings would be exempt from CPP contributions.

Beginning in 2012, those pensioners who are under age 65 and who return to the workforce will be required to contribute to this new benefit, as will their employer. If return to work is between 65 and 70, additional contributions will be voluntary. Other factors:

  • Self-employed beneficiaries will pay both employer and employee contributions
  • Contributions will entitle the beneficiary only to Post Retirement Benefit payments. No eligibility or increase in other CPP benefits will be created, nor will these contributions be subject to credit splitting or pension sharing.
  • Each year of work will provide an additional post-retirement benefit that will begin the following year and will be paid for life.
  • The Post Retirement Benefit will be added to an individual’s CPP retirement pension, even if the maximum pension is already being received.

This provision will become another factor to be considered when looking at starting CPP early. If CPP starts at age 60 and the pensioner subsequently returns to work (or continues to work, since no cessation test will apply), it may be preferable to receive an increased pension at 65 than to supplement the reduced pension with the Post-Retirement Benefit.

As with many areas of retirement planning, there is no easy rule of thumb. Each case should be evaluated to determine the best solution for the individuals involved.

By: Kathleen Clough with 28 comments.
  27/03/2012 12:11:52 PM
Kathy Clough
There are a number of components to your question. However, if you decide to take dividends rather than employment earnings, you will not earn any CPP benefits for the year(s) in question. How this would impact your specific situation is beyond the scope of this blog. Perhaps your accountant could give you some advice in this regard.
  27/03/2012 12:15:54 AM
phyllis van campenhout
What are the impacts of the new rules on the self-employed who intend to keep working until age 65? I am thinking of taking my income as dividends rather than employment income and contributing to a TFSA. What would be the crossover point?
  25/11/2011 4:56:58 PM
Kathy Clough
To Debbie - Your question caused me to look at the new benefit. Please see my new blog, posted November 25, 2011, which discusses the Post Retiremet Benefit. I don't believe it is possible to cease CPP benefit payments once they begin.

To Francis - I encourage you to contact Service Canada with your question or at least get a statement of your contributions to CPP and estimate of future benefits. Go to the Retirement Planning section of the Service Canada website. It is impossible for me to give any specific answers since I do not have sufficient information.
  25/11/2011 7:29:05 AM
Francis Alcrow
im lost!!! If i apply at age 62 will those 36 months make a great difference to me,given lower income earner and possibly drop out.
  16/11/2011 8:42:38 AM
My father who was widowed in 2007 decided to take early cpp at the age of 60 in 2008 based on the history of our family only living to their early 70's and the added income now has really helped.

My father still does work and am wondering with the new PRB - he would be paying over $2000.00 out of his pocket yearly to only gain a return of $200 per year which is not appealing at all. As well, he thought his work would decrease as he became older, but it has actually pcked up and is earning $56,000 a year and now feels that he wished he did not take early CPP - is there a way to stop taking it and start again later?
  19/10/2011 6:12:36 PM
zap rowsdower
Thanks for the article. I keep trying to follow the changes that are or going to happen to the Canadian pension plan, but most of what I read still goes over my head. I do wonder if I should go with my employer's plan or not. Any suggestions on what I should look at and consider?
  09/08/2011 4:32:17 PM
Michael Warsh
Is there any dollar amount for the post retirement benefit posted yet? I am 66 and will work from January 2012 and retire (really this time) August 2012. I have been receiving CPP since age 62. If I opt in to the post-retirement plan I would be paying the maximum monthly CPP contributions for the January to August period. My question is how much would I receive after August when I retire each month as a result of making the 7 month post-retirement contribution versus how much CPP contributions would I save if I opted out of the post-retirement plan? Thanks
  30/04/2011 1:21:34 PM
just tiurned 60 and I just got my first check in march. what will this mean to me next year?

will i be grandfathered?

great article..........thx
  23/02/2011 4:17:41 PM
Kathy Clough
I don't believe you will get enhanced benefits from the drop out provision once you begin to receive payments. And the increase in the drop out provision seems to be defined for 2012 and 2014, with no interim step-ups. However, to be sure, you should contact CPP directly to discuss your specific circumstances.
  23/02/2011 3:21:29 PM
Al Yolles
Dear Kathleen,

Thank you for your informative article on when to begin CPP benefits.

I will be 65 on Feb 15, 2012. I have two questions:

1. If I begin receiving benefits on my 65th birthday, will my benefits be increased automatically as increases in drop-out provisions kick in? or, do I loose these benefits if they kick-in after I start receiving benefits?

2. Do increases to the drop-out provision kick in only in 2012 and 2014 or are there yearly incremental increases?

Thank you very much,

Al Yolles
  19/01/2011 2:41:30 PM
Kathy Clough
David - I do not know if Service Canada has integrated all the changes into their simulators, nor how they will incorporate the phasing in of the changes.
  19/01/2011 1:07:42 PM
David Cowperthwaite
Thanks for this informative article. Do you know if Service Canada has updated their simulator program to reflect these changes? When I talked to them in November, the changes were in progress.
  19/01/2011 10:40:18 AM
Kathy Clough
Geoff - there would be no reduction in your CPP if you retire at 62 and begin benefits at 65. The question is whether or not the three years of non-contribution from 62 to 65 would affect your CPP benefit amount. You may be able to determine this by requesting a copy of your Statement of Contributions. Here's a website with more information:
  19/01/2011 10:06:21 AM
Kathy Clough
Ed - Thanks for your insightful comments. My understanding is that the PRB is mandatory if CPP begins before 65 and the pensioner returns to work, but is voluntary between age 65 and 70. If elected between 65 and 70, the resulting payment would be in addition to existing CPP payments, so could bring total payments above the maximum. Since the PRB is earned and paid annually, it would not come in to play for the calculation of the basic CPP.

For further information, here is the link to the Service Canada website on this topic:
  18/01/2011 3:15:47 PM
Geoff Atkins
Thanks Kathy,
Supplementary question. What is the crossover point if I retire at 62, but collect starting at 65. I have 33 years of contribution at max to now.
  17/01/2011 9:52:56 PM
Ed Fine
Thank you Kathy for a clear exposition. This is the first I heard of the Post Retirement Benefit. Does the "Post Retirement Benefit" function essentially like a supplementary pension plan - ie contributions between retirment and age 65 are used to pay benefits that are incremental to the [reduced] CPP? Presumably this is designed to bring them back in line to what the unreduced CPP (in the extreme case of commencing CPP retirement benefits at age 60 and immediately returning to the workforce).

I am not sure what the public policy purpose behind the PRB is, except perhaps to remove a suppossed "loophole" that permitted people to opt out of the CPP for up to 5 years (although the option was - and will be - fairly pricd in the form of actuarially-reduced benefits.

When retirement occurs post-65, does the PRB essentially provide a top up to the existing CPP ceiling? For example, by deferring retirment to age 70, benefits would be 142% of basic benefits at age 65 (i.e. from your table 8.4%*5 years). Would the PRB be additonal to that? Assuming the PRB is based on the same actuarial assumptions as the CPP, could that be an additonal 42% in benefits for the 70-year old retiree, bringing total CPP payments to 184% of what they would have been had CPP retirement benefits commenced at age 65?
  17/01/2011 11:24:38 AM
Kathy Clough
Geoff - if CPP is started at age 62 in 2015, after implementation of the changes, and with no further contributions, the crossover changes only slightly to age 73.
  17/01/2011 11:12:09 AM
Kathy Clough
Brian - as shown in the second graph, the crossover point for starting at age 70, when the full increase is implemented in 2013 is approximately age 81. In the interim, as the increase is being phased in, the crossover for 2011 is about age 84 and 2012, about age 82.
  16/01/2011 11:06:58 AM
Geoff Atkins
What if you retire early, say at 62, with no subsequent contributions from an employer or employee, is the crossover level?
  14/01/2011 10:32:50 PM
brian thomas
Where is the crossover point if you start collecting at 70 as opposed to 60.
  14/01/2011 6:50:19 PM
Douglas Bryan
We retired at 52 depending on this money at 60
So much for trying to make a retirement plan with C.P.P changing the rules . C.P.P is a bad
  14/01/2011 11:57:46 AM
Kathy Clough
Joe - I referred your question to Caroline Nalbantoglu, Senior Planner in our Montreal office, who advises that she sent an e-mail to the QPP before the holidays and was informed that the changes have to be done via legislation and they are not aware of such legislation being put forth in the National Assembly. She feels the QPP will have to harmonize, otherwise inter-provincial, transfers of QPP/CPP will become troublesome.
  14/01/2011 10:32:40 AM
Joe Goldstein
Thanks for the excellent article. Will these changes also apply to the Quebec Pension Plan?
  14/01/2011 10:29:15 AM
Kathy Clough
Thanks for your question Carl. The analysis is based on the assumption that someone has retired at age 60 and is considering when to begin CPP benefits, with no plans to return to the workforce. The new rules for collecting benefits early and then returning to the workforce, which come into effect in 2012, call for a Post Retirement Benefit in addition to the early CPP regular payments. I have not yet seen any details of the calculations for this new benefit, nor the premiums that will apply. There are many parameters to be considered where an individual is considering CPP benefits in conjunction with on-going work, which make it virtually impossible to provide a “rule of thumb” answer. The question is best considered as part of an overall retirement plan.
  13/01/2011 8:42:42 PM
Carl Katz
What do the graphs look like for self-employed individuals who are paying both the employee and employer portions?
  13/01/2011 4:46:45 PM
Kathy Clough
Wilf – thanks for your question. With a compound 10% rate of return and no tax, the crossover would be beyond age 100. But keep in mind a couple of points – the total CPP benefits received would exceed the annual TFSA contribution amount, and achieving a consistent 10% return would be difficult in today’s market conditions.
  13/01/2011 2:17:52 PM
Wilf Olson
What if you take your CPP starting at age 60 and invest it in a TFSA earning 10% rather than spending it. How does the crossover point change?
  10/01/2011 6:53:46 PM
catherne munro
My,my, life does seem to get more complicated!

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