Applying For a CPP? 4 Next Steps to Take

The Canada Pension Plan (CPP) provides retired individuals with monthly taxable income. The amount provided will depend on a few factors, but there are some steps one should take before applying for their pension. The following is a list of steps to take as you begin the application process.

Step #1: Make Sure You Qualify

As stated by the Canadian government, there are two requirements for an individual to obtain the CPP.

These requirements include:[1]

• Must be at least 60 years old.

• At least one contribution has been made to the Canada Pension Plan. Contributions can come from work performed in Canada or contribution credits received from a past spouse or common-law partner.

The government of Canada also notes that individuals who worked in Québec may receive a different pension plan depending on their circumstances, such individuals would need to meet an alternative set of qualifications.[1]

Step #2: Understand How Monthly Payments Are Determined

The monthly payments provided by the CPP are not standardized and will depend on three primary factors and several secondary factors.

Primary factors include:[2]

• Your age at the start of your pension plan.

• How long and how much you paid into the CPP.

• Your average earnings while working.

In addition, the secondary factors that impact your monthly payments will depend on personal circumstances.

These factors include:[2]

• If you are working while receiving CPP payments (until the age of 70), which will often increase your payment amount.

• Any contributions made after turning 65.

• Periods of reduced to no salary can impact your payment, but the government will exclude up to eight years of this period from your final pension payment calculation.

• Periods of time in which you were raising children under the age of seven.

• Whether you received disability payments or have been disabled.

• Sharing of your pension.

• If you have been divorced.

Step #3: Decide When to Receive Payments

One of the biggest factors to consider when applying for the CPP is the age at which you will begin receiving payments.

Individuals have the option to start receiving payments at age 60, but there will be a penalty for doing so. That penalty is a 0.6 percent reduction to your monthly payments (or 7.2 percent a year). This reduction will continue until it hits a total of 36 percent, or the individual reaches age 65.[3]

Alternatively, those who decide to wait to receive their pension after age 65 will receive a monthly payment increase of 0.7 percent, totaling 8.4 percent a year. This increase will continue until this benefit reaches 42 percent or the individual reaches age 70.[3]

Step #4: Submit Your Application

Once you’ve determined that you qualify and have an understanding of what impacts your monthly pension payments, it’s time to apply for the CPP. There are two primary ways to apply to the CPP, online or through a paper application.[4]

Online applications are the fastest option. Some individuals, however, may be required to fill out a paper application if they:

• Received any type of CPP payment in the past.

• Have ever been denied CPP.

• Do not live in Canada.

• Utilize a third party to manage their pension.

The Canada Pension Plan can provide retired individuals with a monthly payment to assist them in their retirement. However, before applying for the pension, individuals should make sure to cover these four steps to help ensure they are applying at the right time for their individual needs.

1. https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/eligibility.html

2. https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html

3. https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/when-start.html

4. https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/apply.html

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.