Canada and Quebec pension plans
Canada and Quebec pension plans (CPP/QPP) are government pension plans designed to provide necessities in retirement such as food, shelter and clothing.
To have more than those basics in your retirement years, it’s important to have other savings, such as personal investments, or a workplace plan, which could be a pension plan, group retirement plan or group savings plan.
How much will you get?
Calculating the exact amount you’ll receive from the CPP/QPP varies from person to person. To determine the amount you’re eligible to receive, contact Service Canada at 1-800-277-9914; residents of Quebec can call the Retraite Québec at 1-800-463-5185.
The amount of your monthly payment depends on several factors, including:
- How long you contributed
- How much you contributed, based on your income
- The age you decide to start receiving benefits
- If you continue working after you start collecting CPP/QPP
The normal retirement age to begin receiving an unreduced CPP/QPP benefit is 65. You can choose to take a reduced pension as early as age 60 and the permanent reduction in your pension payment is calculated based on the number of months until your 65th birthday.
Starting your pension after age 65 can result in a higher CPP/QPP amount per month. It will increase a set percentage for each month you delay receiving it, up to age 70.
Starting January 1, 2019, the Canada Pension Plan (CPP) is being gradually enhanced. This means you'll receive higher CPP benefits and better financial security in retirement, in exchange for making higher contributions.
What does this mean if you contribute to the CPP?
- You and your employer will each contribute 5.10% instead of 4.95%
- You'll receive more once you retire. Up until 2019, the CPP replaced one quarter of your average work earnings. The enhancement means the CPP will begin to grow to replace one third of the average work earnings you receive after 2019.
- Starting in 2024, an additional 4% contribution rate (by you and your employer) will apply to income above the Year’s Maximum Pensionable Earnings (YMPE), to a maximum amount.
The QPP is also being enhanced over the next 7 years to give future generations financial security in retirement and strengthen QPP funding. What does this mean if you contribute to the QPP?
- Starting January 1, 2019, the QPP now has two components: the Base Plan (the old plan being continued) and the Additional Plan (the new component effective Jan. 1 2019).
- Base Plan: The contribution rate has been set at 10.8 % for 2019, up to the Yearly Maximum Pensionable Earnings (YMPE is 57,400$ for 2019).
- Additional Plan: The contribution rate, which is 0.3% for 2019, will gradually increase to reach 2 % in 2023. In 2024, contributions of 8 % will be applied to that part of income between the 2024 YMPE and 114 % of that YMPE.
- The combined contribution rate to the Base and the Additional plans will gradually increase from 11.1% in 2019 to reach 12.8% in 2023. Starting 2024, for individual earnings more than the YMPE applicable for that year, that rate will reach 20.8 %.
- The combined maximum income replacement rate will gradually increase from 25% to 33.33% between 2018 and 2065, up to a maximum amount.
- The increase will mostly result from contributions made to the Additional Plan. Those who will benefit most from the QPP enhancements are those who will have all of their contributing years after 2018.
- If most of your contributing years are before January 1, 2019 when you retire, your QPP benefit will not be significantly increased. You and your employer will continue to each pay half the contribution rate.
Other Government of Canada benefits
Old Age Security (OAS) is an income supplement to help Canadians during retirement. The amount of the OAS pension you’ll receive is fixed and regularly updated to reflect changes in the cost of living. Factors such as your personal income and the length of time you’ve lived in Canada, determine your OAS payment. To find out if you qualify for the OAS pension, you can visit the OAS pageOpens a new website in a new window - Opens in a new window on the Service Canada website.
The Guaranteed Income Supplement (GIS) is an additional OAS benefit. You may qualify for this payment if your retirement income is low. Your GIS payment is based on your household income and marital status.
The government has made changes to the age of eligibility for the GIS and OAS benefits that affect people born after 1958. More information on this change can be found on the Guaranteed Income Supplement pageOpens a new website in a new window - Opens in a new window on Service Canada’s website.
More information about CPP and other government retirement benefits is available at www.canada.caOpens a new website in a new window - Opens in a new window or by calling Service Canada at 1-800-277-9914. Information on QPP and other retirement benefits in Quebec is available at https://www.retraitequebec.gouv.qc.caOpens a new website in a new window - Opens in a new window or by calling 1-800-463-5185.
Sources: Statistics Canada, Government of Canada website, Retraite Québec website