Changes to Canada Pension Plan
Commencing in January 2012 there were some changes to the Canada Pension Plan (CPP) regime.
All employees aged 60 to 65 (and employers) will be required to make CPP contributions even if they are already receiving a CPP retirement pension. Prior to these changes, employees receiving a CPP pension did not have to continue making CPP contributions.
Employees aged 65 to 70 who are receiving a CPP retirement pension will be required to contribute to CPP unless they elect to stop their CPP contributions. This election can be done by completing Form CPT30, giving a copy to their employer and sending the original copy to CRA. The election will take effect on the first day of the month after the employee gives the Form to their employer.
Employees cannot contribute to CPP after the month in which they turn 70 years of age.
An individual who delays receiving their CPP retirement pension until after age 65 will receive a larger increase in their pension than under the old rules.
Previously, the CPP pension would increase 0.5% per month it is delayed resulting in a 30% increase for individuals who wait until age 70 to receive their pension. From 2011 to 2013, the CPP pension will increase from 0.5% to 0.7% per month it is delayed resulting in a 42% increase for individuals who wait until age 70 to receive their pension.
Conversely, individuals who elect to start receiving their CPP pension before age 65 will have a larger reduction.
Previously, the CPP pension would decrease 0.5% per month before age 65 it is taken resulting in a 30% decrease for individuals who take their CPP pension at age 60. From 2012 to 2016, the CPP pension will decrease from 0.5 to 0.6% per month if it is taken early resulting in a 36% decrease for individuals who take their pension at age 60.
In addition, the requirement for individuals to stop working for two months before applying to receive their CPP retirement pension has been removed. Therefore, once an individual reaches age 60 they may start collecting CPP even if they are still working.