Odds are, you’d like to retire at some point down the line. But when you do, you’ll need some form of pension to replace your working income. That’s where the Canada Pension Plan (CPP) comes into the picture. But what exactly are the CPP eligibility requirements? And do you qualify?
Read on to find out more about what’s required to collect CPP benefits when you finally retire, and how much your contributions might be during your working years.
Key Points
- CPP benefits are paid out to Canadians who are at least 60 years old and have made at least one CPP contribution in their lifetime.
- The maximum CPP benefit amount for 2024 is $1,364.60 per month.
- Employees make contributions worth 5.95% of their annual earnings (matched by their employers), while self-employed contribute 11.9%.
- Contributions are capped based on earnings ceilings set by the federal government each year.
What Is The CPP?
Before you retire, you’ll want to make sure that you have the financial means to keep up with all of life’s expenses after you’ve stopped working. The CPP is a social insurance plan that provides payments to retirees, people living with a disability, and other eligible Canadians.
You contribute to your CPP throughout your working years. Once you’re eligible, you can start tapping into your CPP after years of contributing. These payments will help fund your retirement years.
How Much Will I Receive In CPP Pension Payments?
For 2024, the maximum amount you can receive if you begin collecting your pension when you’re 65 years old is $1,364.60 per month. Whether you can receive the maximum amount depends on your specific situation, including your age and contribution amounts.
Canada Pension Plan (CPP) Eligibility Requirements
In order to qualify for CPP benefits, you must meet the following criteria:
- Be at least 60 years old
- Have contributed to your CPP at least once
Contributions can be from work performed in Canada, or from credits received from a former spouse or common-law partner at the end of the relationship.
Who Is Required To Contribute To The CPP?
Every Canadian worker between the ages of 18 and 64 are required to make CPP contributions. This applies to those who earn more than the basic exemption amount, which is currently $3,500. If your annual income is less than $3,500, you don’t have to make CPP contributions.
Quebec workers are the exception, as they have another pension plan to contribute to.
Canadian workers between 65 and 69 years of age who are already receiving CPP pension payments can choose to stop contributing to the CPP.
How Much Do You Need To Contribute To Be Eligible For The Canada Pension Plan?
The amount you’re required to contribute to the CPP is based on the following:
- Your employment status (ie. whether you’re an employee or are self-employed)
- The Year’s Maximum Pensionable Earnings (YMPE)
Employment Status
Your CPP contribution rate determines how much you must contribute to your CPP. Your employment status determines what rate you pay.
Employees. As an employee, you must contribute half of the required CPP contributions, while your employer is required to pay the other half. In other words, contributions are split between employees and employers. The contribution rate for employees is 5.95%. Your employer contributes another 5.95%.
Self-employed. If you’re self-employed, you’re required to contribute the full amount on your own without any contribution rate split. The contribution rate for self-employed Canadians is 11.9%.
Year’s Maximum Pensionable Earnings (YMPE)
CPP contributions are made on your annual earnings, or net self-employed income, within a certain range. The Canadian government sets the maximum amount at the beginning of each year based on average wage increases, which is referred to as the Year’s Maximum Pensionable Earnings (YMPE).
The YMPE is basically the earnings ceiling for the year, which sets your contribution limit. The earnings ceiling for 2024 is $68,500. That means the estimated maximum annual contribution for 2024 is $3,867.50 for workers and $7,735 for the self-employed.
CPP Contribution Snapshot
| Maximum annual pensionable earnings for 2024 | $68,500 |
| Exemption amount | $3,500 |
| CPP employee contribution rate | 5.95% |
| CPP employer contribution rate | 5.95% |
| CPP self-employed contribution rate | 11.9% |
| Maximum CPP employer contribution amount | $3,867.50 |
| Maximum CPP employee contribution amount | $3,867.50 |
| Maximum CPP self-employed contribution amount | $7,735.00 |
CPP Enhancement
The CPP enhancement allows today’s income earners to take advantage of higher benefits during retirement by making higher contributions to the CPP. Increases to the CPP contribution rate began in 2019 and will continue until 2025.
Until 2019, the CPP contribution rate was 4.95% for employees over 18 who earn over $3,500 annually, up to the YMPE. Phase one of the CPP enhancement bumped this rate to 5.95% through incremental rate increases through to 2023.
On January 1, 2024, a second limit was introduced, known as the second earnings ceiling (CPP2), or the Year’s Additional Maximum Pensionable Earnings (YAMPE). For 2024, the YAMPE is $73,200. In other words, the CPP2 will involve two earnings limits.
As of 2024, employees and employers will each contribute another 4% on earnings in addition to the first earnings ceiling, up to the amount of the second earnings ceiling. The rate for self-employed individuals is 8%. In this case, the maximum you’ll contribute in 2024 is $188 as a worker and $376 as a self-employed individual.
In 2025, the estimated YMPE will be $69,700, and the estimated YAMPE will be $79,400. That means the maximum yearly CPP2 contribution in 2025 will be $388 for employees, and $776 for the self-employed.
Younger employees who are new to the workforce will benefit the most from this increase in CPP contributions.
What Is QPP?
In Quebec, the government works under a different pension system. This is called the Quebec Pension Plan (QPP). Instead of contributing to the CPP, Quebec residents contribute towards the QPP.
For 2023, the contribution rate for employees is 6.40%, and employers must contribute the same amount, for a total of 12.80%. This translates to a yearly contribution maximum of $4,038.40 for workers (matched by employers).
If you’re self-employed, you’re paying the full amount of 12.80%, or $8,076.80, up to the earnings ceiling. This year, the maximum pensionable earnings in Quebec is $66,600.
How Do You Calculate CPP Contributions?
CPP income tax calculators are available online to help you quickly calculate your CPP contributions. To calculate yourself, the formula is relatively straightforward:
(Annual income – $3,500) x 5.95%
For instance, if your annual income is $60,000, the calculation for your CPP contributions would be as follows:
($60,000 – $3,500) x 5.95% = $3,361.75
So, in this example, your contribution amount for the year would be $3,361.75.
Is There An Amount Of Time You Must Work For CPP Eligibility?
There is no minimum time requirement for a worker or self-employed individual to qualify for CPP benefits. As long as you’ve made at least one contribution to the plan, you’re eligible for the benefit once you reach retirement age.
Of course, the amount you contribute will reflect how much you can withdraw when you reach the age of CPP eligibility. The longer you’ve worked and the more you’ve contributed, the more you can expect to get from the CPP when you retire.
Do you know what pension income splitting is?
Can I Still Work While Collecting CPP Pension?
You can continue to receive a CPP retirement pension while working without affecting your pension amount. In fact, you may even be able to give your CPP retirement pension a boost by continuing to contribute to your CPP while still working.
You’re allowed to contribute to the CPP until you’re 70 years old. Once you turn 70, your contributions will stop, even if you choose to continue working. But until then, ongoing contributions will increase your retirement income.
Canada Pension Plan Eligibility For Non-Residents
Canadian citizens and permanent residents may qualify for CPP payments once they’ve reached the age of 60 and have made at least one CPP contribution, as mentioned. But what about non-residents of Canada?
Canada Pension Plan Eligibility For Non-Residents
Even if you’re a non-resident of Canada, you might still qualify for the CPP and other foreign benefits. If you’ve lived or worked in Canada or abroad, you may still qualify thanks to international social security agreements. The international social security agreements can help you qualify by:
Contributory Periods
The social security agreement between Canada and your country of residence may help you qualify for benefits by letting you merge contribution periods in Canada and contributions under the other country’s legislation. In other words, your contribution periods abroad may be counted as contribution periods to the CPP.
Period Of Residency
Similarly, the social security agreement may help qualify you for pension benefits by allowing you to combine your time of residency in Canada along with your time of residency in another country. Simply put, your periods of residency abroad may count as periods of residency in Canada for Old Age Security (OAS). The agreement may also eliminate any restrictions that may exist based on your citizenship or on pension payments from abroad.
Canada Pension Plan Taxes For Non-Residents
You may be eligible for CPP, but you’ll be subject to certain taxation depending on your net income — both in Canada and abroad — and your country of residence.
Non-Resident Tax
If you’re classified as a non-resident of Canada, your pension and benefits may be subject to the “non-resident” tax. This is a type of Canadian income tax that is deducted from your benefits. Currently, the non-resident tax rate is 25%, unless you qualify for an exemption under a tax treaty between Canada and your country of residence.
How Old Do I Have To Be To Start Receiving CPP Retirement Benefits?
You can begin collecting your full CPP retirement benefits (or QPP if you’re in Quebec) once you turn 65 years of age. However, you can start receiving these pension payments as early as when you turn 60.
If you start collecting early, however, you won’t receive your full pension amount.
CPP payments will decrease by 0.6% every month, up to a maximum reduction of 36% if you begin collecting your pension at the age of 60. If you start after you turn 65, your CPP payments will increase by 0.7% every month, up to a maximum increase of 42% if you begin receiving payments when you’re 70 or older.
The age that you chose to start receiving CPP benefits depends on your needs and lifestyle. If you’re in financial need and have not yet turned 65, it may be worth considering starting to collect CPP pension before you’re65. But if you’re looking to maximize your payments, it’s best to wait.
How Are CPP Payments Treated For Tax Purposes?
Your CPP retirement pension payments are considered income. As such, they’re taxable. So, when you start drawing from your CPP, you’ll need to pay taxes on this form of income.
The CPP tax rate that you’re required to pay on your pensionable income varies depending on your total taxable income you have in the tax year.
Income taxes from your CPP payments are not automatically deducted. However, you can request to have them deducted from your monthly pension payments either online on in your My Service Canada Account, or by filling out the Request for voluntary Federal Income tax Deductions CPP/OAS (ISP3520CPP) form.
Other Types Of CPP Benefits
In addition to your CPP retirement benefits that you’ve worked toward contributing to over your working years, there are other CPP benefits that are available to those who qualify:
CPP Disability Benefit
If you have a prolonged mental or physical disability that prevents you from working, are under the age of 65, and have made adequate contributions to the CPP, you may qualify for the CPP Disability Benefit. The maximum CPP Disability Benefit amount for 2024 is $1,606.78.
CPP Survivor Benefit
The CPP Survivor Benefit is a monthly payment made to the deceased CPP contributor’s spouse or common-law partner. The maximum CPP Survivor Benefit for 2024 is $739.31 for those younger than 65 years, and $818.76 for those 65 and older.
CPP Children’s Benefit
The CPP Children’s Benefit provides monthly payments to the dependent children of CPP contributors who are either disabled or have passed away. The child must either be under the age of 18 or a full-time student if under the age of 25. Once the child turns 25 years old, they no longer qualify for these benefits.
For 2024, the monthly rate is $294.12.
CPP Post-Retirement Benefit
If you continue working while collecting your CPP retirement pension and are under 70 years of age, you can continue making CPP contributions. These contributions will go toward your CPP Post-Retirement Benefits (PRB), which will boost your retirement income. The maximum Post-Retirement Benefit amount for 2024 is $44.46.
CPP Death Benefit
The CPP Death Benefit is a one-time benefit paid to the estate of a deceased CPP contributor, and is typically used to cover funeral expenses and other related costs.
This benefit is not automatically paid out and must be applied for. A named executor or court-appointed administrator will apply for the CPP death benefit, ideally within 60 days of when the CPP contributor passes away. If there is no estate or the benefit was not applied for in time, others may apply for the benefit, such as the surviving spouse or common-law partner or next-of-kin.
The maximum CPP Death Benefit for 2024 is $2,500.
Can I Use My CPP To Apply For A Loan?
If you have a pressing expense while in retirement, but your current pension payments aren’t enough to cover it, you may consider taking out a loan. But one of the main requirements when applying for a loan is an adequate income.
If you’ve stopped working, you don’t have employment income to use when you apply for a loan. Conventional lenders, like banks and credit unions, don’t typically accept CPP pension benefits as an acceptable form of income. However, some alternative lenders may accept your CPP pension payments as income, as long as your benefits are enough to cover your loan payments. Keep in mind, however, that you may be charged a higher interest rate if you don’t have traditional income when applying for a loan.
Final Thoughts
Collecting CPP benefits when you retire can help you make ends meet when you enter the golden years. But part of the Canada Pension Plan eligibility requirements are that you make contributions at some point during your career. And the more you contribute, the more you can expect to receive in CPP benefits, which can help you live more comfortably in retirement.
