Changes to CPP

The coming changes to our national pension plan are as follows:

Change #1

The monthly CPP payment amount increases by a higher percentage if you start taking it after age 65.  Prior to the change, if you took CCP after age 65, the monthly payment would increase by .5% for every month after age 65 that you delayed receiving it – up to age 70.  So if you delayed receiving it to age 70, your monthly payment would be increased by 30%.  (.5% x 12 months x 5 years).  The government is gradually increasing this percentage from .5% to .7% from now to the end of 2013.

Change #2

The monthly CCP payment amount will decrease by a higher percentage if you start taking it before age 65.  Before the change; similar to the increase if you took your CCP at age 60, your payment would be decreased by 30%.  After the change, the pension reduction will gradually increase from .5% to .6% from 2012 to 2016.  So, if you retire at age 60 in 2016, your pension will be reduced by 36% if you start collecting it right away.

Change #3

Prior to 2012 when calculating your CCP benefit; you where allowed to ‘drop’ seven of the lowest income earning years; this elimination ultimately increases your payment.  Starting in 2012, the number of years allowed to be ‘dropped’ increases to 7.5 and by 2014 it increases to 8 years.

Change #4

Starting in 2012, the ‘work cessation test’ will no longer apply.  This means people will no longer have to stop working or reduce their earnings for the two months prior to receiving their benefits.  This change will help people make a slower transition into retirement.

Change #5

The Post-Retirement Benefit (PRB).  This PRB is similar to CCP but applies to people who start receiving their CCP benefits, and continue to work.  It will be mandatory to contribute if you are over 60, working in Canada and receiving CCP benefits.  Once you fully retire; you will receive this secondary pension (PRB) as well as your CCP pension.   

Whether or not to start taking your CCP benefits can be a daunting decision, if you need help figuring it out, give me a call.

Have a great weekend,

Tracey

Source:  Advisor’s Edge Report, 12/11