Changes to the Canada Pension Plan

The Canada Pension Plan (CPP) is in the process of implementing a number of changes to CPP benefits. These changes are designed to provide flexibility to Canadians as they ease into retirement.

These changes are relevant for anyone who starts collecting their CPP pensions after 2010. If you started collecting your pension from the CPP before December 31, 2010, and you do not re-enter the workforce, these changes will not affect you. The changes to CPP have no impact on the benefit you receive from the CAAT Pension Plan.

The CPP changes came into effect on January 1, 2011 and will be fully implemented by 2016.

Starting CPP before age 65

If you have already started collecting your CPP pension, the following changes do NOT apply to you.

CPP pensions can start as early as age 60, with a reduction. Previously, CPP pensions that started before age 65 were reduced by 0.5% per month before age 65, or 6% per year, with a maximum possible reduction of 30%.

Starting this year, the amount of reduction has increased, so that by 2016, CPP pensions that start before age 65 will be reduced by 0.6% per month or 7.2% per year with a maximum possible reduction of 36%. These changes will be phased in with a slight increase to the reduction rate every year for 5 years.

Starting CPP after age 65

CPP pensions that start after age 65 are increased. Prior to 2011, the increase was 0.5% per month for each month after age 65, or 6% per year with a maximum possible increase of 30% at age 70.

From 2011 to 2013, the increase is being raised to 0.7% per month or 8.4% per year, for a maximum possible increase of 42% for Canadians who start CPP pensions at age 70.

Working and collecting CPP

The current round of CPP changes will now allow Canadians to work and contribute to CPP at the same time, building what is called a “Post-Retirement Benefit” or PRB. If you are between age 65 and 70 and return to work while collecting CPP, you can choose to make CPP contributions and build the additional Post Retirement Benefit. The PRB payments start the year following the year of contributions and are paid for life.

While the changes to CPP have no impact on your entitlement under the CAAT Pension Plan, and do not in any way change the options or entitlements you might have under the Plan, government pensions make up an important component of your retirement income. If you have not yet applied for your government pensions, visit the Service Canada website at www.servicecanada.gc.ca for more information.