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I'm a CPP expert. Any questions?

353K views 850 replies 175 participants last post by  jlunfirst 
#1 ·
I worked for CPP for more than 32 years, and have recently retired.

I'd like to share my knowledge if you have any questions, especially around the calculation of CPP benefits.
 
#112 ·
Hi. Could you explain the rule of "10/40ths of the max CPP payout at age 65"? Thanks.
deejaj - I'm not 100% sure what "rule" you're referring to, but when the general dropout was 15% it basically worked out to where each year of max contributions was worth 1/40th of a max CPP retirement pension at age 65. That is because your contributory period would have been 47 years (from age 18 to age 65) and you would have dropped out basically 7 yrs (15% of 47 years = 7.05 years or 85 months).

If this is the rule that you are thinking about, it has currently changed to the 1/39.5ths rule and will be changing again in 2014 to the 1/39ths rule, as the dropout is currently 16% and will be 17% next year.

Does this help at all?
 
#113 · (Edited)
CPP and Social Security

Dogger,

Thanks for doing this.

We worked for 3 years in the US and contributed to Social Security. So, we have a 3-year hole in our CPP contributions and our length of SS contributions is below the threshold for receiving anything at 65. I know there is a treaty between the US and Canada on this, but I'm having trouble understanding how it works. Will call Service Canada when I have some time, but I was hoping you could explain it before I called.

Thanks
 
#114 ·
Dogger,

Thanks for doing this.

We worked for 3 years in the US and contributed to Social Security. So, we have a 3-year hole in our CPP contributions and our length of SS contributions is below the threshold for receiving anything at 65. I know there is a treaty between the US and Canada on this, but I'm having trouble understanding how it works. Will call Service Canada when I have some time, but I was hoping you could explain it before I called.

Thanks
CapitalOne - The agreement is intended to deal with situations exactly like yours, whereby you have contributed to both countries but where you don't have enough contributions to at least one of the countries to qualify for benefits. In your case, you won't need the agreement to qualify for a CPP retirement pension (as the minimum is 1 year of contributions), but it might help you qualify for benefits from the U.S. I won't pretend to be an expert on either the agreement or the U.S. requirements, but it's my understanding that you need 40 quarters of coverage under the U.S. plan to qualify, and it sounds like you might have 12 quarters at the most. Under the agreement, each year of contributions to CPP can count as four quarters in allowing you to meet the minimum 40 quarter threshold to qualify for a U.S. benefit, although the amount of your benefit will be based solely on your 3 years of U.S. contributions.

There may be some other restrictions in the agreement that I'm not aware of, so here is a Service Canada link that gives a lot more information: http://www.servicecanada.gc.ca/eng/isp/ibfa/countries/overview/usa.shtml
 
#115 ·
When do the PRB's kick in?

I am on CPP now-took it at age 60. I will be receiving monies this year, and for the following two years, that will be subject to CPP. Do I wait until age 65-in four years, to get the cumulative PRB's? Do they commence at an earlier date and are they adjusted at some point each year to reflect the previous year's contributions?
Thanks
 
#116 ·
PRBs are payable effective January of the year following the contribution. That means that the PRB for your 2013 contribution will be effective January 2014, although you won't get your first such PRB until your 2013 tax return is processed and the contribution is confirmed by Revenue Canada and communicated to Service Canada (probably around April or May 2014), but payment will be retroactive to January.

Service Canada had originally implied that the PRBs would be issued separately, but from the cases that I've seen this year (based on 2012 contributions), it appears that they are included with your regular CPP retirement pension cheque/deposit.
 
#117 · (Edited)
Thanks Dogger. So, is this all 'automatic' once my T4 is processed, ie I do not have to do anything but wait until the CPP folks catch up to it? No pesky forms to fill out etc? I am impressed.

I have to say that I have had occasion to call CPP. The service has always been very good. The wait time was minimal and the CSR was very pleasant, business like, and helpful. I have found this to be the case on other Service Canada inquiries as well.
 
#118 ·
fraser - You're welcome. Yup, the PRBs are fully automatic! Then again, Service Canada sometimes struggles with updating the calculation of your regular retirement benefit, especially if you worked in the year that your pension started or in the immediately prior year. I don't know if you noticed this other thread that I started: http://canadianmoneyforum.com/showthread.php/15683-Are-you-receiving-as-much-CPP-as-you-should-be

I agree that the Service Canada staff are very pleasant and helpful. I can't agree that it's always easy to get through though!
 
#120 ·
I am currently 58 years old and receiving CPP disability benefits. I can retire anytime on a DB pension plan with 60%.
Will I lose my Disability Pension once my company pension kicks in?
Hummer - Your CPP disability pension won't be affected by any decision that you make on your company pension. It will only stop if/when you are no longer disabled or when you turn age 65, at which time it will convert to a retirement pension.
 
#121 ·
Hi Dogger and thank you for your informative posts on the site. I have one that I have thought about for years and just haven't persued it. Unfortunately we lost our son to cancer in 1996 just before he was 19yrs old. He did manage to finish high school and moved to Vancouver to be with a special friend and worked at a lower paying job for a short time before his health failed. Can't recal how long he worked for (it was his first job) but perhaps only 6 mos or so. I can't recal exactly what happened after he left us that as things were, as expected, a blur. He had no assets (or liabilities) to speak of and there was not really any estate. Sometime later I seem to recal either calling CPP or submitting a death claim but was declined. I never persued it but thought I would bounce it off you to see if some death benefit should have been paid?. I'm sure he was paying into CPP for the short time he worked and in reviewing the matter on the CPP web site it seems a payment perhaps should have been made. Thank you in advance for any comments you may have.
frase
 
#122 ·
frase - I'm sorry to confirm that your son couldn't possibly be eligible for a CPP death benefit. The minimum qualifying period for any death or survivor benefits is contributions for at least three years. Even if he started contributing right at age 18 (the earliest that he could), he would at best have had two years of contributions. My sympathies for your loss!
 
#124 ·
Hi ... just read your article on post retirement benefit and have a question.
If I'm over 65, still working, not claiming CPP but still paying CPP then will I not be eligible for the PRB?
The above conditions are true for me, additionally, I have been divorced, so the 39 year payment rule doesn't totally apply, however, I'm also a widower who receives a widower allowance.
 
#125 ·
jgueld - PRBs are payable on contributions made after you've started receiving your CPP retirement pension. Since you haven't yet started receiving CPP, those contributions will be used in calculating your regular CPP retirement pension.
I'm not exactly sure what 39-year payment rule you're referring to, but if it's that the general dropout means that you use your best 39 years to average your earnings (which is true starting in 2014), being divorced wouldn't change that. Can you clarify what you mean?
If you're receiving a CPP survivor's pension, this really complicates the calculations involved in deciding when to start your CPP retirement pension. Here's a link to an article that I wrote on "combined benefits": http://retirehappy.ca/cpp-survivor-benefits/
I strongly suggest that you get some qualified advice on when to apply for your CPP retirement pension, based on all of the issues that you've addressed (PRBs, divorce and CPP survivor's benefits). I could help, if you email me at DRpensions@shaw.ca
 
#127 ·
jgueld - The 39-year still applies to you, even with your credit split. What the rule means, is that you count your best 39 years (it's actually 39.5 years for 2013 and doesn't become 39 years until 2014) of earnings when determining your average earnings when calculating your CPP pension. That means that presently you would count your 13 M years and your best 26.5 CS years. Assuming that your CS years used to be M's (before the credit split), they would at worst be 1/2 M's now, meaning that you presently would be eligible for at least 26.25/39.5ths of a maximum retirement pension. If some/all of the CS years are more than 1/2M, your pension will be even higher. Make sense?
 
#130 ·
Hi Dogger, thank you for your offer to help people understand the CPP better. If my common law spouse had two children, and they were born 8 years apart, how many years will the government drop out for her calculation and will it only impact the years in which she was bringing up a child under the age of 7? In other words, you can't have your cake and eat it too if you had your lowest earning years when you retired early and drop THEM off even though you weren't raising children at the time you retired. Correct?
 
#131 ·
janus10 - Your CL spouse can drop out up to 14 years under the child-rearing dropout (CRDO) provision, but that dropout does only apply to the specific years when her children were under age 7. If she had good earnings during some/all of those years though, they won't be dropped out.

Regardless whether she does or doesn't drop out some or all of those specific 14 years under the CRDO, she will still be able to use the general dropout (used to be 15%, is now 16% and will increase to 17% starting 2014) if she retires early. For example, at age 65, her CPP contributory period would be 47 years (from age 18 to 65). If she does dropout all 14 CRDO years, that would leave her with 33 years for calculation purposes. Under the current general dropout of 16%, she could still drop out her lowest 5.28 years (64 mths), rather than the normal general dropout period of 8.5 years if she doesn't use the CRDO at all.
 
#132 ·
Is my understanding of the following CPP items correct (just double checking).
1) I retired in 2006, having made the maximum YMPE contribution each year of my 40 years of employment. Since I hit the maximum CPP pension payable, I will not be penalized for delaying CPP until 2014 when I turn 70. Ie, the 15% dropout allowance does not apply and I'll be eligible for the max age 65 pension plus 60 X .7% = 42%.
2) I turn 70 in June, 2014. I would like to delay CPP pension income until 2015. In Jan 2015 I will apply for CPP retroactive to July 2014.
Thank you,
Fred
 
#133 ·
Fred - You're 100% correct on your analysis, except for your comment that "the 15% dropout does not apply". The 15% dropout does apply (it will actually increase to 17% starting in 2014), but that's not the only dropout that applies. You will also benefit from the "over 65 dropout", which allows you to drop out those last 5 years, plus 17% of the other 44ish years in your contributory period.

The main thing is, you should indeed receive 142% of the maximum 2014 retirement pension, and you can apply in 2015 with retroactivity.

And Congrats for living in Winnipeg. That was my home base before I moved West!
 
#134 ·
Seems like the survivor benefit is based on 60% of the maximum. That's what the Services Canada web site shows. I would have expected 60% of 142% of the maximum. Is that correct?
My wife is one year younger than I and her CPP will be approx. $320 at age 70. She is still contributing to CPP, employment income approx. $8000/yr.
 
#135 ·
Fred - I'm afraid that I've got a bit of bad news for you on the survivor's benefit. It's 60% of your "calculated retirement pension" which is before any actuarial adjustment for your age (up or down). In your case, that means 60% of the maximum (60% of $1,012.50 = $607.50.

Unfortunately however, since your wife is also eligible for her own CPP retirement pension, there's a further reduction in calculating what's called a "combined benefit". It's a somewhat complex calculation, but in your wife's case the combination will likely mean a reduction of $90 from the $607.50, meaning that after your death she would receive a combined benefit of approx. $837.50 (her own retirement pension of $320 plus a survivor's benefit of $517.50).
 
#136 ·
Ramblings

Just an FYI that Service Canada needs you back. They are not unique in that many companies are losing their most experienced people to retirement but the quality is suffering more in some places than others. For example, my wife called Service Canada about two months ago to ask about OAS benefits. At that time she specifically asked if one could defer receiving it past 65 like you can with CPP -AND SHE WAS TOLD NO – HAD TO TAKE IT AT 65 AT THE LATEST. I know the ability to defer OAS to 70 only started in 2013 but come on?

OK, beside my rant I have a couple of questions. I apologize if it has already been covered but I read all posts and could not see it specifically. Am I right that if I stop working (self employed) at age 64 but defer CPP until age 70 my pension might be reduced due to no contributions past age 64? Does this depend on how many contributory years I had – if I had max contributory years would it not be reduced? I would like to get the extra 42% pension payment at 70 but am starting to doubt the value of benefit if it will be reduced by not contributing past 64.

Also I have been playing around in Excel trying to calc the payback period of deferring CPP while adjusting my investment rate of return and the inflation rate. As my investment return on the earlier payments went up it pushed out the payback period. As inflation went up it made the payback period earlier because of CPP being higher due to indexing). I have now come to the conclusion that I should treat CPP deferral like a derivative in that it offsets the risk of my other investments doing poorly or high inflation – sort of like buying an annuity with my additional CPP contributions. Do you have any thoughts on this?

Sorry for the ramble.
 
#137 ·
edarte - As far as your CPP pension being reduced if you don't contribute past age 64, it will be a minor reduction if at all. If you do have at least 39 years of max contributions, there would be no impact at all. If you have at least 39 years of good contributions, any reduction would be minimal. The only year that you have to worry about at all is age 64, because the other years from age 65 to 70 can all be dropped out under the over-65 dropout provision. That means that worst-case scenario, your pension would decrease by about 2.5% (1/39th) for having zero earnings at age 64, which is far less than you will gain by deferring.

I agree with you 100% on your assessment of how investment rate and inflation would affect the payback calculations.
 
#139 ·
Thank-you for this offer of assistance.
I'll soon be receiving some CPP death benefits. The death occurred in Oct. 2013, and I'm still waiting for payment. Would I have to claim that on my 2013 income tax because that's when the death occurred and when the payments will be calculated from...? Or will it be forwarded to the yr. of receipt of monies, that being in 2014?
..or maybe this is more a question for CRA...?
 
#141 · (Edited)
My significant other is retired as of July 2012. She will be 56 in October. Her most recent statement (Feb 06, 2014 says she would collect $1019.12 at 65, $652.24 at 60, $1447.15 at 70)
29 of the 37 contribution years on the the statement (1983-2011) were at MPE, 2012 was about 90% and the other 7in the earliest years were at very low levels - maybe 25% average.

She currently has a bridged pension to age 65 with CPP. I would like to know an estimate of what benefits would be at ages 60, 65, 70 since the govt. calculator doesn't seem to be accurate with our situation.

Last year you calculated mine for me and I had originally planned to retire at the end of 2014. I have decided to retire before the end of May this year so will have to adjust my expectations of CPP down slightly I guess.

Thank you and we appreciate very much any help you can offer.
 
#142 ·
RBull - I've stopped doing detailed calculations for free, as I couldn't keep up with the demand. I would be happy to do them for a fee, if you PM me or email me at DRpensions@shaw.ca.
In general terms, from what you describe I would ballpark her results as $600 at age 60, $850 at age 65 and $1,220 at age 70. These numbers could increase however, if she had any children and they were under age 7 during her low years of earning.
 
#144 ·
Dogger, I've waded through these many pages and may have missed an answer to this. I've elected to begin CPP when I turn 60 this Sep. I have applied at Service Canada and the first question from them was "how much income tax to withhold?" Had never thought about that and the lady wasn't very helpful. Would this be an individual decision based on other income or is there a stock percentage. I have 39 years of max CPP contributions so will be expecting near the max.

Thanks
 
#146 ·
expat help

Hi Dogger 1953,

Just finished reading the thread, thanks for all the good information.

I have other issues I hope you can shed some light on.

I am 47, an expat Canadian who has been out of Canada since 1998, left at age 31.
Several years ago, my mother received a letter from CPP, stating my pension would be a rather paltry $300 or so.
Not surprising, my best producing years have been outside Canada.

So, my questions are:

Is CPP based on your best 10 years of contributions? and would the fact I am still out of Canada continue to hurt that pension
amount, would the amount continue to fall ?

Would I be able to transfer my pension contributions from the other country (Slovakia), or is better to try to collect
from both countries ?

You mentioned OAS was based on 40 years residence after 18, but that something would be available after 20 years.
Is it safe to assume that amount would be half of what a full 40 resident would get ?

Where should I go to make sure CPP has all the right information ?

Thanks in advance.
 
#147 ·
Hi Dogger 1953,

Just finished reading the thread, thanks for all the good information.

I have other issues I hope you can shed some light on.

I am 47, an expat Canadian who has been out of Canada since 1998, left at age 31.
Several years ago, my mother received a letter from CPP, stating my pension would be a rather paltry $300 or so.
Not surprising, my best producing years have been outside Canada.

So, my questions are:

Is CPP based on your best 10 years of contributions? and would the fact I am still out of Canada continue to hurt that pension
amount, would the amount continue to fall ?

Would I be able to transfer my pension contributions from the other country (Slovakia), or is better to try to collect
from both countries ?

You mentioned OAS was based on 40 years residence after 18, but that something would be available after 20 years.
Is it safe to assume that amount would be half of what a full 40 resident would get ?

Where should I go to make sure CPP has all the right information ?

Thanks in advance.
Martin - The CPP retirement pension is based on the best 83% of your contributory period, so if you apply at age 65 it would be based on your best 39 years. Best is defined not in terms of highest actual earnings years, but in terms of highest earnings relative to the YMPE for that year. So if all of your 13 or so years of possible contribution (from age 18 to 31) were at the YMPE level, your CPP at age 65 would be 13/39th of the max CPP, or about $346 in 2014 dollars. If those same 13 years averaged half-max, your CPP at age 65 would be about $173.

The OAS is earned at the rate of 1/40th for each full year of residence in Canada after age 18, so you're absolutely correct that 20 years of residence would translate to half of the full basic amount, or about $275 monthly in 2014 dollars.

To validate your CPP record, try this weblink: http://www.servicecanada.gc.ca/eng/online/mysca_credential.shtml
 
#148 · (Edited)
I am 37 and have only worked on payroll for about 10 years. The remainder I have been running a business which I get a very minimal salary and a dividend at the end of the year. I got a pension report last year and estimated I would earn $350 as pension, which is terrible. I own a few income properties and have been able to support my family off the rents while I enjoy my wife and young kids, which I very much enjoy. If I continue to live off my rents alone, and have no cpp contributions until I retire, what would I be looking at as pension income? Would I get a pension supplement? I am in Quebec.

Am I doing bad for myself by doing it this way? I don't know how long I will own these income properties either so don't want to rely on these alone for my retirement.
 
#149 ·
mcu - I don't know all of the subtle differences between CPP and the QPP/RRQ, but I think they're similar enough that I can give you a ballpark answer, but you're probably not going to like it. Under the CPP, if you were currently age 37 and your CPP statement showed an estimate of $350 and if you made no further contributions until age 65, your pension amount would decrease to somewhere between $134 and $171. I'm not sure what you mean by pension supplement, as there's no such thing under CPP.
 
#151 ·
mcu - The $134-$171 amount is just for your CPP/QPP, and that amount does depend strictly on what you contribute from earnings. Aside from that, you qualify for OAS just based on residing in Canada, and the full basic OAS amount is approx. $550 if you have at least 40 years of residence in Canada, after age 18. Aside from that, there is the GIS (Guaranteed Income Supplement) if you have low income.
 
#154 · (Edited)
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