# CPP changes



## sags (May 15, 2010)

My wife just turned 65, and has been receiving early CPP benefits since age 60.

She has been working part time, and earns substantially less per year then when she was working full time. Her benefits were calculated based on her full time earnings and contributions into the CPP.

She just received a letter from work, notifying her they will begin taking CPP contributions from her CPP benefits, unless she signs an "opt out" form.

Considering she did not contribute to the CPP for the past 5 years and she would be contributing based on lower income in the future, I doubt it would be of any benefit for her to re-start contributions.

The penalty for early benefits has been raised effective Jan 1, 2012

She is going to sign the opt out form and return it, but I was just wondering if anyone had any opinions on this.

I don't envision any benefit to her to continue contributing.


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## Daniel A. (Mar 20, 2011)

I believe the form has come as a result of the earlier rule changes that allow one to continue to make contributions after 65.

Your right there is nothing in it for her, opt out.


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## RedRose (Aug 2, 2011)

Thank you for sharing this information. I am not quite sure what is happening. I am 63 and have not taken my CPP yet, as I too am female and working part time but I still contribute a small amount.
RU saying I should stop now?
Thank you for any clarification.


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## Daniel A. (Mar 20, 2011)

No you should continue, sags wife is already collecting.

CPP rules are based on 45 years of contributing for the maximum benefit.
Recent changes were made to allow one to continue paying in after age 65 if someone wanted. They also changed the % for early and later payment.

You can get the numbers for your current amount it may be better for you to apply or it might be better to wait.

They did also change things so you don't need to wait to collect the old rule was you had to stop work for a period of time before collecting.

Go to their website and have a look at the changes.


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## sags (May 15, 2010)

CPP benefits are based not only on the number of years of contributions, but also on the level of those contributions.

The maximum CPP benefit is over $900, but the average payout is less than $500 a month.

You can opt out a % of your low income years, *but if a person is working full time, and then switches to part time work, their CPP benefits may be reduced for each year of low income that is reported. *

The best scenario is 45 years of high, uninterrupted earnings, contributing the maximum amount in contributions, but in this day and age that may be difficult to accomplish.

When I retired at age 55, after working non-stop for as long as the CPP has been enacted, I was told I could "opt out" 7 years total, and if I worked part time my benefits would start reducing for every year over the 7 years opted out.

Each person is different, depending on their income level, years of uninterrupted work, if they quit work to raise children (additional opt out years), and the age when benefits start.

I have a website that has CPP information and links on it ................

MY CPP..........http://mycpp-rds.blogspot.com

The CPP tends to be a little complicated and overwhelming for some people, but I have found the Service Canada people most helpful, and truly seem to want to help people receive the benefits they deserve.

What is shocking is the number of people who don't know they are entitled to such benefits as CPP...or CPP survivor benefits.....OAS or GIS. The government will only pay back retroactively for 12 months. Unfortunately, some people have found out many years later and the money is lost to them. 

I suppose there are people out there who never collect what they are entitled to.


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## RedRose (Aug 2, 2011)

Thank you Daniel and Sags for the helpful info. I will continue to contribute even though I am working very part time, it may all help later on after 65 I hope, just trying to maximize my income but also watching the income tax and clawbacks.


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## RedRose (Aug 2, 2011)

Does anyone know if I can continue drawing the %portion of my late husbands CPP, as well as my CPP and my OAS at 65.. I do have another small pension of approx $500 a month too. 
Do they reduce the OAS or CPP based on the other income? 
It is lot less than 66K as this is the figure in Govt of Canada site for clawback.
Someone kindly told me maximum CPP is $11,800 which would probably cover both CPP amounts that I would receive.
Just wondering about OAS if that would be okay? Thank you if anyone knows.


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## MoneyGal (Apr 24, 2009)

You really owe it to yourself to sit down with an actual financial planner, RedRose; who will be able to answer these questions based on your specific financial circumstances. 

As a general rule: OAS is "clawed back" but CPP is not. You should be able to receive a survivor's pension from your husband's CPP, as well as your own CPP, your pension, and OAS. (It does not sound as though you would be eligible for GIS.)


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## Daniel A. (Mar 20, 2011)

You really need to take what MoneyGal is saying to heart, getting a little here and there when major decisions need to be made soon is not in your interest.

The site is great for those not in a hurry and have time to reflect and learn.


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## carverman (Nov 8, 2010)

MoneyGal said:


> As a general rule: OAS is "clawed back" but CPP is not.


M.G; please explain to me why you are saying OAS is clawed back?
http://www.servicecanada.gc.ca/eng/isp/oas/oasrates.shtml

I am receiving OAS and combined with my CPP (split after divorce), and My Nortel pension (such as it is now), my tax filing for 2010 was total gross income: $34,411.xx
minus 
indefinite alimony/ support payments of $3600 annually+ my personal tax credits...
I end up with a net taxable income of $30,811.xx

I started receiving OAS when I turned 65 in March of 2011. 
First payment was in April, so effectively I'm only collecting 9 months of OAS in 2011,currently receiving $526.85 a month, with the current maximum being $537.97.
This will give me a OAS income of $48,417 for 2011,
and not taking indexing into account for 2012, about $6324
next year.

So are you saying that the $11.12 difference between the OAS max payment and what I am receiving is a "clawback"?


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## MoneyGal (Apr 24, 2009)

This is part of the reason that an online forum can never fully replace face-to-face conversation. 

If your income is over about $67K, your OAS payments are reduced at source. 

http://www.taxtips.ca/seniors/oas.htm


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## carverman (Nov 8, 2010)

MoneyGal said:


> This is part of the reason that an online forum can never fully replace face-to-face conversation.
> 
> If your income is over about $67K, your OAS payments are reduced at source.
> 
> http://www.taxtips.ca/seniors/oas.htm


Whew! Thank goodness for that clarification!.. M.G 
I was worried (for a while), after I read it.

I am no where near $67K in taxable income, so I won't have to worry about that..
as a matter of fact..depending on what annuity I receive after my Nortel DB pension plan is wound up (possibly by end of 2012), my next consideration will be tax deferment/relief on property taxes and applying for the GIS..

otherwise it's "cat food time" for me...
and since I have a cat..she will have to start sharing her food with me..that is..should my income continue to drop down a lot.


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## RedRose (Aug 2, 2011)

I have tried to find an independent financial planner. I have googled Actuaries too and they all seem tied to CFP which are tied to insurance companies or other forms of investing.

I am meeting with two different firms next week at a couple of hundred $$$s a visit so I hope they are helpful in sorting the wood from the trees for me.

I sincerely appreciate all the advice and valubale information *Money Gal* and others have contributed. I have felt very supported on this forum with my dilemma. Thank YOU All.


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## MoneyGal (Apr 24, 2009)

You know what...I am toying with getting back into fee-for-service financial planning. I'll let you know if I ever do it again...!


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## Four Pillars (Apr 5, 2009)

RedRose said:


> I have tried to find an independent financial planner. I have googled Actuaries too and they all seem tied to CFP which are tied to insurance companies or other forms of investing.


I agree it's hard.

I wrote about this and linked to a few possible resources.

http://www.moneysmartsblog.com/how-to-find-a-fee-only-financial-advisor/


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## MoneyGal (Apr 24, 2009)

Welllllll...in this case, I think she needs an actuary, as opposed to a financial advisor. Most advisors don't know enough about calculating life expectancies and how pensions are structured and how to create guaranteed income in retirement (in accordance with a client's preferences).


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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> Welllllll...in this case, I think she needs an actuary, as opposed to a financial advisor.


Fair enough, however I was addressing her specific request to find a fee-only financial advisor.


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## Karen (Jul 24, 2010)

Carverman, MoneyGal explained that you're not subject to the OAS clawback, but I'm still puzzled as to why you're only receiving $526.85 per month, if the current maximum is $537.97.


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## carverman (Nov 8, 2010)

Karen said:


> Carverman, MoneyGal explained that you're not subject to the OAS clawback, but I'm still puzzled as to why you're only receiving $526.85 per month, if the current maximum is $537.97.


Don't know..the $11 discount isn't going to make that much difference to me, as the amount they are paying me..$526.85 is* before tax*, and I will have
to pay taxes on the 9 months of OAS they have given me, when I file my return next spring. 

In reality, as they say..timing is everything, because I
started receiving OAS in April and my Nortel pension got cut 30% in August.

Even though the OGPF (Ont guaranteed pension fund) kicks in $300 on my first $1000 of pension each month, I'm still out $300 per month now, compared to what I was
getting up to July of this year..so I am thankful that at least this year, that the drop in Nortel pension income is compensated by my OAS..and I am still ahead (at
least for now), by $200 a month..rather than taking a $600 cut in pension as some Nortel pensioners that don't have
a provincial guaranted pension fund to help them out. 

What I am worried about at this point, is what the monthly payment from an annuity for me will be, when they
finally wind up the seriously underfunded (40% now) pension fund. Right now pension actuaries? are determining how much of a lump sum (I will get from the wound up commuted pension plan..which has to be invested either in a LIF or in an annuity) because of restrictions on the plan's windup.

The plan's windup administrators (Morneau-Shepell) will sometime next year, directly transfer my commuted pension amount (allotment?) to a tax sheltered option (two choices available to me) only from the plan's windup adminstrators. 
I do not get a check directly to be able to invest it myself.

Depending on how much of further drop I experience with those two available options (reduced monthly pension draw), the cat food joke, may in fact become a reality.


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## Daniel A. (Mar 20, 2011)

I'll keep an eye out for your post once the dust settles carverman, hopefully you won't get hit any harder than what has already taken place.


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## sags (May 15, 2010)

Carverman,

Could you fashion the situation so the money isn't paying income, and you could qualify for GIS benefits.........and keep the cash as an emergency fund.

After transfer to a LIRA some Provinces allow one time withdrawals, albeit at different levels.


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## carverman (Nov 8, 2010)

sags said:


> Carverman,


You can call me Dan..sags> 



> Could you fashion the situation so the money isn't paying income, and you could qualify for GIS benefits.........and keep the cash as an emergency fund.


Not sure if that is possible with the only two options available (a LIF... or an annuity with some insurance company (SunLife?). 

I saved this from document sent to me...

"Pension plans that are registered in Ontario must be administered in compliance with the PBA, which sets out requirements that must be followed for the operation, funding and termination of pension plans in Ontario. 

Effective October 1, 2010, the newly appointed plan administrator is needed to ensure continuity in the administration of the Nortel pension plans (including payment of pension benefits), to commence the wind up of the Nortel pension plans, and to represent the pension plans as decisions are made regarding allocation of the proceeds from the sale of Nortel’s assets. 

In carrying out the wind up of the Nortel pension plans, the administrator will be responsible for determining adjusted entitlements, including the “top up” provided through the Pension Benefits Guarantee Fund (PBGF) to entitlements earned in Ontario. 

A retiree’s entitlement with the PBGF “top up” is determined as of the date the plan winds up. 

The fact that it may take years to annuitize the Nortel pension plans has no impact on the pensions of Ontario retirees, as the Ontario government through the PBGF assumes the risk for any changes in the annuity markets.

*Annuitize means to “flip the switch” and start taking income from an annuity. 
What Happens When You Annuitize?*


When you annuitize, you tell the insurance company to start paying you. 

When you make the choice to annuitize, you also decide how the payments should be structured. For example, you can choose a variety of options including: 
Lifetime payments 
Life with period certain 
Joint and last survivor 
Period certain 

If you annuitize, the best option is the one that does whatever you need it to. For example, if you’re only taking care of yourself, the lifetime payment option might be a good choice. If there are other people counting on the income, you’ll want to look into the other options. 

_The process of converting an annuity investment into a series of periodic income payments_. Annuities may be annuitized regularly, over a long or short time period, *or in some cases, in one single payment.*

Investopedia Says:
After an annuity has been through the process of annuitization, the investment is said to have been annuitized. 

Annuitized investments are not necessarily paid out completely to the beneficiaries. Depending on the terms of the annuity policy, some of the money could go to the person's estate, to a trust or to the insurance company, for example"



> After transfer to a LIRA some Provinces allow one time withdrawals, albeit at different levels.


I'm not quite up to the differences between a LIRA 
and a LIF..which is the other option of choice to me.

"At retirement, holders must convert their LIRAs/LRSPs into *Life Income Funds (LIF) or Locked-In Retirement Income Funds (LRIF) which will provide pension income during retiremen*t. Instead of converting to a LIF or LRIF, holders may opt to use the proceeds of their LIRA/LRSP to purchase a life annuity from an insurance company."

so basically I have one of two choices, since I am retired and drawing a pension...LIF or an annuity. Currently there were no other options offered to me...but there could be later on at time of actual windup.

In any case, it's will take many months for the windup of the DB plan because it is so complicated in Nortel's case.
Currently there are 5700 pensioners in the Managerial/Non-Negotiated plan and 6000 members in the negotated (unionized plan)..
...those ranks are expected to swell to 13,000 in the non-negotiated plan, (of which I am a member of), and 8,200 in the negotiated plan..as younger plan members meet retirement qualifications...so this yet another worry for me, with the plan already 40% underfunded. If they don't wind up the plans soon..the plans could effectively go "bankrupt"...

The SCC hearing (on a similar defunct Ontario based company's DB pension plan), is going to take place at some point next year..but this may only be applicable to companies that operated solely in Ontario. 

Nortel operated in several provinces and the US/Britain/and some other countries..so even if the
SCC decides that pensioners should have a higher prioroity..it may be only applicable to companies that filed under provincial laws and requirements in Ontario.. 
not to Nortel, which filed under CCAA (Canadian Creditor Arrangement Act) under federal jurisdiction court.

So it remains to be seen whether the pensioners will get anything from the distribution of the proceeds from the sale of the assets..or not.


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## cardhu (May 26, 2009)

Sags ... the benefit, if your wife continues to contribute, is that her CPP income would increase ... its actually a pretty good deal, with a relatively short payback period... the fact that she hasn’t contributed over the past 5 years is irrelevant, and the fact that she’d be contributing based on a lower income works to her advantage, not her disadvantage ... she should not opt out without first assessing and understanding what it is she’d be opting out of. 

CPP benefits are not based on the amount contributed, but on the amount of pensionable income earned during the applicable measurement period. Part-time employment can only add to applicable earnings, it cannot subtract from it, so it can never decrease benefits, it can only increase them. 
______

RedRose ... it has been suggested that you “should” continue contributing to CPP ... but that is somewhat misleading, in that it implies you have a choice ... the fact of the matter is that you don’t ... you couldn’t opt out of contributing now even if you wanted to ... well, except by quitting your job, that is ... the opportunity to opt out of further CPP contributions in the manner sags' wife is considering, exists only for those who are already collecting CPP (their own CPP, not a survivor benefit) *and* who are aged 65 or older ... but as mentioned above, opting out in that case can be a bad decision ... just because you can do something doesn’t mean you should.

Only the highest-earning 3% or so of the senior population are affected by OAS clawbacks ... if you’re not up there in the stratosphere among that elite group, then don’t worry about it. 

Your own CPP, combined with the survivor benefit from your husband’s CPP, can exceed $11,800 in some circumstances, in just the same way that a single person’s CPP can exceed $11,800 in some circumstances. All generic CPP limits are stated on the assumption that you begin taking your CPP on your 65th birthday ... even a one-month deviation in either direction impacts those limits ... if you delayed applying for CPP until some time after you turn 65, you could receive significantly more than $11,800 ... likewise if you started CPP at age 65, but continued working, and didn’t opt out of continued contributions. There are many variables. It may be difficult to find an advisor who is truly up to speed on all of this. 
______

Daniel ... it has always been possible to continue contributing after age 65 ... in fact, I believe it was mandatory to age 70 if you weren’t already receiving CPP ... the recent amendment allows you to continue contributing, on a voluntary basis after age 65 *despite* having already begun receiving CPP. 

I have also heard that people who choose to delay starting their CPP until sometime after age 65, will now be able to opt out of further contributions from age 65 onward, and will be able to include those years as additional low-earnings dropouts. That would be a good thing, because in some cases, people can get to a point where their additional contributions don’t add any value .... it can be sunk money at that point.


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## sags (May 15, 2010)

Double post..............sorry


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## sags (May 15, 2010)

Thanks for the information Cardhu.

I checked the Service Canada website, and discovered that each month a person contributes to the CPP after the age of 65, are automatically opted out as low income years. 

They state that if contributions are continued past age 65, the CPP benefit would increase.

I have no idea how to calculate the value of contributions vs increased benefits.

I am still concerned that the years between age 60 (when she took early CPP) and age 65,during which she wasn't allowed to pay into the plan, would count against her, as low income non contributory years.

We will talk to Service Canada, and as long as her pension is not in danger of being lowered, we will reverse the opt out of the contributions.

As the contributions are tax deductible........it makes even more sense.

Thanks for the heads up............


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## cardhu (May 26, 2009)

You’re welcome.

The additional low-earnings dropout for people who continue contributing past age 65 applies only to people who haven’t yet begun collecting CPP ... your wife has, so it has no impact on her. 

The calculation to determine your wife's basic CPP benefit was done 5 years ago and is now water under the bridge ... nothing in her work pattern since then, or in the future, can change that ... so there is no possibility that her existing benefit could be reduced, through any action of hers now. Your concern about the 5 years from age 60 to 65, during which she wasn’t contributing, is unfounded. Those years are irrelevant. 

Additional contributions at this point can only increase the benefit, never decrease it. In fact, they are two separate benefits, determined through two separate calculations. They would arrive in a single combined payment each month, but the calculations are completely independent of each other. 



> _I have no idea how to calculate the value of contributions vs increased benefits._


Its easy ... check sec 59.1 of the CPP Act, or google the words “post retirement benefit”.

Just as the decision to take CPP at age 60 takes life expectancy into consideration, so does this decision ... but the payback period is so short that only those in very poor health, or with a known terminal illness, are obvious candidates for opting out ... if your wife is generally in good health, then the probabilities strongly favour continuing to contribute .... especially if her part-time income is low. 



> _As the contributions are tax deductible........it makes even more sense._


They’re not deductible … they produce a tax credit … but if your wife is in the lowest bracket, then the net effect is the same. 
The additional benefit is a good deal even for those who can’t use the credit (because they pay no tax to begin with), but you’re right, its an even better deal for those who can make use of the credit.


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## sags (May 15, 2010)

Great information........thanks a lot, I appreciate it.


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