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Canada's Pension Benefits Changing

The financial turmoil of current economic events has effected the possibility of early retirement for many baby boomers. 


Investments are down, company pension plans are coming under pressure and now government benefits are changing to adapt to less revenue.

Governments in France are pushing retirement age ahead from 60 to 62 1 to save money, the United Kingdom has scraped the mandatory retirement age of 65 to allowing for longer working years to collect premiums 2 , now Canada has announced a plan to increase contributions, to drop benefits for early retirees and to allow contributions after 65 to support the Canada Pension Plan.

These pension changes will effect you if (From the Services Canada website) ...

-an employee who contributes to the Canada Pension Plan (CPP), whether you are just starting your career or you are planning to retire soon
-a self-employed person who contributes to the CPP
-between the ages of 60 and 70 and you work while receiving your CPP retirement pension (or if you work outside of Quebec while receiving a Quebec Pension Plan (QPP) retirement pension) 
-or an employer who contributes to the CPP on behalf of your employees

You will not be affected by these changes if you started receiving a CPP retirement pension before December 31, 2010, and you remain out of the work force.

Also from the Services Canada website here is how these planned changes will look like ...
  • Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65 (gradually from 2011 to 2013).
  • Your monthly CPP retirement pension amount will decrease by a larger percentage if you take it before age 65 (gradually from 2012 to 2016).
  • The number of years of low or zero earnings that are automatically dropped from the calculation of the CPP retirement pension will increase (in 2012 and 2014).
  • You will be able to begin receiving your CPP retirement pension without any work interruption (starting in 2012)
  • If you are under 65 and you work while receiving your CPP retirement pension, you and your employer will have to make CPP contributions. (or if you work outside of Quebec while receiving a QPP retirement pension) (starting in 2012). These contributions will increase your CPP retirement benefits (starting in 2013).
  • If you are age 65 to 70 and you work while receiving your CPP retirement pension, you can choose to make CPP contributions (or if you work outside of Quebec while receiving a QPP retirement pension)(starting in 2012). These contributions will increase your CPP benefits (starting in 2013).
The following changes to the CPP will be phased in gradually between 2011 and 2016, with the first major change occurring in January 2011 for people retiring after age 65. For more information and a video explanation check out the Services Canada Website at http://www.servicecanada.gc.ca/eng/isp/cpp/postrtrben/main.shtml

Make sure to contact your accountant and financial advisor to review how these changes will effect your present cash flow, impact your early retirement and financial benefit of contributing beyond 65.


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