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Ready to Retire? Changes in the CPP

By: Alex Nikotina

Published On: October 4, 2016

The Canadian Government has reached the decision to move forward with strengthening the Canada Pension Plan (CPP). The CPP enhancement will be introduced through a 7-year gradual process starting on January 1, 2019.

CPP in Canada

Cpp retirement
The Canada Pension Plan gives Canadians predictable lifetime benefit as partial substitute of earnings in the case of their retirement, disability or death. The CPP operates throughout Canada, with the exception of Quebec, that has their own Québec Pension Plan (QPP) system.

In Canada, individuals can start receiving their CPP retirement pension at the age of 65. The pension amounts vary depending on the individual’s contribution, the number of years working, the time of retirement (before 65 or after 70 years of age) or other benefits (disability benefit).

As of July 2016, the average retirement pension at the age of 65 was CAD$642.45, and the maximum payment amount was CAD$1,092.50.

The Strengthening of the CPP

The Canada Pension Plan enhancement was first introduced and discussed in 2015, but the agreement was not reached that year. The conversation continued into 2016, with the federal Finance Minister Bill Morneau voicing out his commitment to the CPP enhancement.

On October 4th, 2016 the Canadian government has announced that the nine participating provinces (with the exception of Quebec) have agreed to take part in the new CPP plan enhancement. BC province was the last one to sign the agreement, with many people still being concerned about the impact of the enhanced CPP on the Canadian small businesses.

The Canadian government strongly believes that the new CPP will be beneficial for the Canadians in the long run. Once fully in place, the new strengthened CPP will contribute up to 50% more into the pensions of future retirees.

“This stronger and more stable pension program will help middle class Canadians enjoy their retirement years as they should – enjoying their health and families – instead of worrying about making ends meet,” shares Prime Minister Justin Trudeau.

Expected Changes

  • The new CPP will gradually increase mandatory contributions to the plan to boost the program's benefits for the future retirees. The goal is to provide greater income security for future generation of Canadians after retirement.
  • The share of annual earnings that Canadians will get in retirement will increase from one-quarter to one-third. It will also increase the maximum income range covered by the CPP by 14%.
  • A slower economic and employment growth is expected in the short run, followed by the boost in growth in the long run (after 2025, according to the Finance Department’s predictions).

“We're focused on how we can improve the retirement security for Canadians and do it in a way that's going to enhance our economy over the long term,” says Bill Morneau.


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