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Archived - Annual Report of Canada Pension Plan 2003-2004
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Benefits and Expenditures
The number of people receiving CPP benefits has increased steadily over the past decade. As a result, Plan expenditures have increased. Figure 1 shows the yearly increases since 2000-2001. Figure 2 shows the percentage of CPP expenditures by type of benefit.
Retirement Pensions
Retirement pensions represent 66 percent of the total number of CPP benefits paid and 70 percent of the total benefit dollars paid out by the CPP in 2003-04. The amount of each contributor's pension depends on how much and how long he or she has contributed and at what age he or she begins to draw the benefits. In March 2004, the monthly maximum retirement pension was $814.17; the average payment was $457.66.
The CPP offers flexibility with respect to the age of retirement. Seniors can take their pension as early as the age of 60 or receive a larger pension if they wait until after they turn 65 to begin receiving it. The CPP permanently reduces the pension by 0.5 percent per month for those who take their pension before their 65th birthday, reflecting the fact that these seniors will, on average, receive their benefits longer than someone who retires at the age of 65. For those who take their pension after their 65th birthday, the CPP permanently increases the pension by 0.5 percent per month (up to a maximum of 30 percent), reflecting the fact that these seniors will receive their benefits for a shorter amount of time on average. The adjustments are intended to ensure that there is no advantage or disadvantage from taking the retirement benefit at a particular age. The Chief Actuary of the Canada Pension Plan completed a study on this issue in March 2003. It found that, given current Plan provisions, the adjustments for early/late pension take-up create an incentive to take the benefit early. Removing this incentive would require the downward adjustment of early pensions and upward adjustment of late pensions. The study also noted that the neutrality of the Plan's adjustment factors would be improved by changing the benefit calculation and contribution requirements.
The study is available at www.osfi.gc.ca.
Disability Benefits
Disability benefits, paid to eligible contributors and their children, represent 8 percent of the total number of CPP benefits paid and 14 percent of the total benefit dollars paid out by the CPP in 2003-04. In March 2004, the maximum monthly disability benefit was $992.80; the average payment was $747.04. The children's monthly benefit was a flat rate of $192.68.
The 2004 Budget Implementation Bill included amendments to the CPP to allow for reinstatement of a CPP disability benefit that had been stopped because a person had returned to work if the person again became incapable of working within two years after the stopping of the benefit.
The planned implementation date for the new automatic reinstatement protection is early 2005.
Survivor Benefits
Survivor benefits, paid to the surviving spouse or common-law partner of the contributor and his/her dependent children, represent 23 percent of the total number of CPP benefits paid and 15 percent of the total benefit dollars paid out by the CPP in 2003-04. The amount of the monthly survivor benefit varies depending on a number of factors, including the age of the spouse or common-law partner at death and whether the beneficiary also receives other CPP benefits.
FIGURE 1 - BENEFITS AND EXPENDITURES BY FISCAL YEAR
Death Benefits
Death benefits represent 3 percent of the total number of CPP benefits paid and 1 percent of the total benefit dollars paid out by the CPP in 2003-04. The death benefit is a one-time payment. The maximum payable is $2,500; the average payment in March 2004 was $2,214.10.
Other Provisions
The CPP includes provisions that compensate for periods of low earnings, namely the child rearing provision (CRP) and the 15 percent general drop-out provision. The CRP allows the CPP to drop up to seven years of low or zero earnings (while caring for a child under the age of seven) from the calculation of a contributor's CPP disability, survivor and/or retirement benefit. The 15 percent general drop-out provision is for low or zero earning years and applies to all contributors. The Plan has other provisions under which married or common-law spouses may either share their retirement pensions (where the union is intact) or split their credits (where the union has dissolved).
FIGURE 2 - PERCENTAGE OF BENEFIT DOLLARS PAID FOR 2003-2004
