Common menu bar

• Français
• Home
• Contact Us
• Help
• Search
• canada.gc.ca

Breadcrumb

1. Home >
2. Publications and Resources >
3. Service Partners

Canada’s Public Pension system

• Previous
• Table of Contents
• Next

Canada Pension Plan Retirement Pension

CPP - Retirement Pension

 

 

Notes 1

Age 65 = “Basic”

• Paid the month after 65th birthday

Age 60-65 = “Flexible”

• Amount decreased by 0.5% for each month under age 65 (max. 30%)

Age 65-70 = “Flexible”

• Increased by 0.5% for each month over age 65 (max. 30%)

Notes 2

Substantially Ceased Working Cessation Test For Early Retirement

• Stop working (not working) by the end of the month before the Retirement pension starts and for the month the pension starts being paid

  or

• Earnings from employment must be below the maximum monthly CPP Retirement pension for the month before the Retirement pension starts and for the month the pension starts being paid
• Max. of $884.58 for each month (2008)

Notes 3

Maximum Retirement Pension

Calculation:

25% of 1/12 of the average YMPE for the last five years

Notes 4

Flexible Retirement Pension
Maximum 2008 Rates

Age 60	$619.21
Age 61	$672.28
Age 62	$725.36
Age 63	$778.43
Age 64	$831.51
Age 65	$884.58
Age 66	$937.65
Age 67	$990.73
Age 68	$1043.80
Age 69	$1096.88
Age 70	$1149.95

Notes 5

Basic Retirement Pension

5-Step Calculation:

Step 1.
Average of the last 5 years YMPE including the year of retirement

2004 $40,500
2005 $41,100
2006 $42,100
2007 $43,700
2008 $44,900

Total $212,300 ÷ 5 = $42,460
$42,460÷12 = $3,538 X 25% = $884.58 (maximum retirement pension in 2008)

Basic Retirement Pension Calculation

Step 2.
Adjust all of the contributor’s earnings into year of retirement value

In 1967, the contributor made $2,300 in earnings while the YMPE for that
year was $5,000
In year 2008 value, his $2,300 earnings would be worth
$2,300 is to $5,000
as “X” is to $42,460

“X” = 2,300 x 42,460 = 97,658,000 ÷ 5,000 = $19,531.60

Step 3.
Apply the 15% and other drop-out provisions to the contributory period

25 years left in the in contributory period

Step 4.
Calculate the Yearly Average Pensionable Earnings in year 2008 value

Let’s say that the total amount of earnings for the 25 years left in the contributory period is $433,440 $433,440 ÷ 23 = $17,337.60

Notes 6

Step 5.
Calculate the Retirement pension

The yearly amount of a Retirement pension is equal to 25% of the contributor’s Yearly Average Pensionable Earnings

$17,337.60 x 25% = $4,334.40

The monthly Retirement pension is: $4,334.40 ÷ 12 = $361.20

Sharing your retirement pension with your spouse or common-law partner

• Both spouses or common-law partners must be at least 60
• Must be married or living in a common-law relationship
• Must be in receipt of a RTR pension if they contributed to the Plan
• One or both spouses/partners must have valid CPP contributions
• Payments to both spouses/partners are taxable

Notes 7

Sharing Retirement Pensions

• Linked to the cohabitation period
• Split not necessarily at 50/50
• Total Retirement pension(s) amount before and after Assignment is the same
• Two separate T4 slips issued

Notes 8

Sharing Retirement Pensions

 

 

 

 

 

Credit Splitting

 

 

 

 

 

 

Notes 9

Credit Splitting

Between January 1, 1978 and December 31, 1986

• On January 1, 1978 credit splitting became available, for legal marriages only, in cases of divorce or annulment
• Spouses must have lived together for at least 3 consecutive years
• Marriage ended in divorce or legal annulment
• Must request the credit splitting within 36 months of the divorce or annulment unless both spouses agree in writing to the credit split

Divorce or Legal Annulment on or after January 1, 1987

• Spouses must have lived together for at least 12 consecutive months
• Marriage ended in divorce or legal annulment
• Mandatory on receipt of a request and the necessary information
• No withdrawal allowed

Notes 10

Separation of Spouses (married couple) on or after January 1, 1987

• Lived together for at least 12 consecutive months
• Separated for at least 12 months
• Either spouse must apply in writing
• No time limit to apply
• Must apply within 3 years of death of one of the spouses
• Withdrawal allowed within 60 days of notification

End of Common-law Union on or after January 1, 1987

• Lived together in a conjugal relationship for at least 12 consecutive months
• Separated for at least 12 months (unless one of the partners dies)
• Either partner must apply in writing within 4 years of the date of separation unless both partners agree in writing to the credit split
• Withdrawal allowed within 60 days of notification

Notes 11

---

Notes

1. All benefits have an income related component to their calculation with the exception of Children’s benefits which are flat rate benefits.

   Amount of benefit is based on how much and how long you have contributed to CPP and in some cases, age at which benefit is paid.

   Substantially Ceased Work - Cessation Test for Early RTR (Age 60-64)

   • Earnings received from employment/self-employment must be below the maximum monthly CPP retirement pension for the month before and the month the pension starts being paid.
   • Can go back to work the next month with no impact on benefit but can no longer contribute to CPP.
2. Age 65 is considered normal age of retirement
   At age 65 - (max. benefit payable is $863.75 for 2007)
   Can continue to work
   Up to 11 months retroactive payment (if applied sometime after age 65)
   May be withdrawn within 6 months
   No readjustment of pension amount

   Between age 60-65
   No re-adjustment of pension amount at age 65
   No retroactivity
   Stop or earn up to a maximum amount for period of time
   Stops contributing to CPP

   Between age 65-70
   Retroactivity a maximum of 11 months prior to application (back to age 65 only) after 1996
   Cannot contribute after age 70
   No actuarial increase after age 70

3. Refers to Bullet #1:
   Can go back to work next month with no impact on benefit.

4. 25% of your average monthly pensionable income as it is calculated over your entire contributory period.

5. The average RTR age was 62.5 for 2005
   The average RTR amount was $464.36 for 2005
   In 2005 62% of new retirees took early retirement
   In 2005 33% of people retired at 65.

6. Step 3:

   1. 1967-2008 = 41 year contributory period
   2. 41 years x 15%= approx. 6 year (up to 15% of an individual contributory period may be excluded when calculating the average monthly pensionable earnings) and add another 10 years of other drop-out provisions (for example purposes)
   3. 41 years-6 years (at 15%)-10 years (other drop-out provisions) = 25 years
7. What does "pension sharing" mean?

   Spouses or common-law partners who are together (not separated or divorced), who are both at least 60 years of age, and who receive CPP/QPP retirement pensions can share their pension benefits. This may result in tax savings. If only one of you is a CPP contributor, you share that one pension. The overall benefits paid do not increase or decrease with pension sharing.

8. The amount that can be shared is the percentage of shared co-habitation years in contributory period as it related to the whole contributory period.
   e.g. What percentage of your contributory period was spent in co-habitation?
9. Under the Canada Pension Plan
   spouses are:
   persons legally married to one another.
   common-law partners are:
   persons of the opposite or same-sex who have been living together in a conjugal relationship for at least one continuous year.

   For more information, refer to the following website: http://www.hrsdc.gc.ca/eng/isp/pub/factsheets/credit.shtml

10. 1. Any spousal agreement in existence must be submitted. Some agreements contain an explicit provision that refers to the Canada Pension Plan and indicates that there be no division of credits, particularly if they were signed:
    • - before June 4, 1986
    • - in British Columbia, Alberta, Saskatchewan, or Quebec
    2. No split will be made if the result would be a loss of benefits to both spouses/common-law partners
    
11. Former common-law partners of the same-sex may be eligible for credit split if separation occurred after July 2000 and they have been seperated for at least 12 months since that date.

• Previous
• Table of Contents
• Next

Primary navigation (left column)

Date Modified:

2008-01-07