Changes to the Canada Pension Plan (CPP)

The CPP is changing, beginning in 2012. These changes include the following, taken from the Service Canada website:

  • Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65.
  • Your monthly CPP retirement pension amount will decrease by a larger percentage if you take it before age 65.
  • If you are under 65 and you work while receiving your CPP retirement pension, you and your employer will have to make CPP contributions. These contributions will increase your CPP retirement benefits.
  • If you are age 65 to 70 and you work while receiving your CPP retirement pension, you can choose to make CPP contributions. These contributions will increase your CPP retirement benefits. You can opt out of making CPP contributions by filing form CPT30.
  • The number of years of low or zero earnings that are automatically dropped from the calculation of your CPP pension will increase.
  • You will be able to begin receiving your CPP retirement pension without any work interruption.

Of particular immediate interest to our clients who are under 65 and work while already collecting a CPP retirement pension, is that starting in 2012 employee and employer contributions to the CPP must be made. Before the change, regardless of your age, if you were receiving your CPP retirement pension and working, you did not pay CPP contributions.

Also, these changes are of particular importance to our clients who are age 65 to 70 and who are working while receiving their CPP retirement pension. If you fall into this category, starting in 2012 you can choose to opt out and not pay CPP contributions. You can also choose to make CPP contributions, which is the “default” option. If you wish to opt out of making CPP contributions, you must file Form CPT30 – Election to Stop Contributing to the CPP. This election will take effect on the first day of the month following the date that you give the form to your employer. Therefore, in order for the election to take effect January, 2012 you must file the form by the end of December, 2011. You must send the original form to the Canada Revenue Agency. A copy of the Form CPT30 together with filing instructions can be found on the CRA website. A link to the form is below:

http://www.cra-arc.gc.ca/E/pbg/tf/cpt30/cpt30-11e.pdf

More information on the changes to the CPP can be found on the Service Canada website and on the Service Canada fact sheet brochure linked below:

http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/ISPB-348-11-10_E.pdf

Leave a Reply