Sarah Deveau: Money Matters


Can I Count on the CPP?

Determining How Much You Will Receive

In a recent blog post I wrote about how much you should be saving for your retirement. In it I mentioned the Canadian Pension Plan (CPP). Do you know how much CPP you’ll receive? It’s likely not as much as you expect.

Determining how much CPP you can count on in your retirement is tricky business. Your CPP payout depends on how much you contribute to the CPP, how long you have contributed for, and your age when you choose your pension to begin. Some parts of your contributory period can be dropped out of the calculation, such as periods when you stop working or your earnings become lower while you are raising your children under the age of seven; low earning months after the age of 65; any month when you were eligible for a Canada Pension Plan disability pension; and 15 per cent of your lowest earning years in your contributory period.

Dropping out these periods of low earnings will increase the amount of your benefit.

The maximum CPP amount for 2010 is $934.17 per month starting at age 65. However, most people don’t qualify for the maximum CPP. To receive the full amount, you would have had to pay the full rate for 40 years between the age of 18 and 65. What’s the full rate? CPP uses Yearly Maximum Pensionable Earnings (YMPE) to determine your annual contribution. In 2010, that was $47,200. Made less than the YMPE in any of those 40 years of contributions? You’ll receive less than the maximum CPP.

You should receive a CPP statement of contributions annually, but if you haven’t received one, or just can’t find it, you can call Service Canada at 1-800-277-9914 and ask for your Canada Pension Plan statement of contributions.

This document will outline your years of eligibility, and list an M for each year you contributed the maximum. If you hit 40 Ms before you retire, you’ll get the maximum. If you have 75% Ms, you’ll get about 75% of the max. If you’re over age 30, you’ll also see an estimate of what your benefit would be if you were eligible today.