A question I’m often asked concerns how CPP benefits are calculated when someone is eligible for both a CPP retirement pension and CPP survivor benefits (commonly called a combined benefit).

Many people seem to be aware that these combined benefit calculations are subject to some kind of maximum amount, but what that maximum amount is, is clearly misunderstood. And being subject to a maximum amount is only a small part of the story.

In this article, I hope to help you understand the general process involved in the calculation and to clear up any misunderstandings, especially about the maximum. The calculation is relatively complex and although I’ve included most of the details, I’m not necessarily expecting you to calculate your combined benefit yourself.

## Three basic points to be aware of:

- Combined retirement/survivor benefits are subject to a maximum. The way this maximum is applied depends on the age at which you started your retirement pension.
- Even if adding your two benefits together would not exceed the maximum, you will not receive all of both benefits when they are combined.
- If you started receiving your retirement pension earlier than age 65, it will be increased by a special adjustment to offset some of the survivor’s benefit that is “lost” as a result of the combined benefit calculation process.

## CPP Survivor benefits calculations

Before I discuss the calculation of a combined retirement/survivor’s benefit, it’s probably useful to understand the calculation of a survivor’s benefit on its own.

There are two basic calculations for a CPP survivor’s benefit, depending on the age of the surviving spouse:

- For a surviving spouse under age 65 (<65), a survivor’s benefit on its own would be 37.5% of the calculated retirement pension of the deceased contributor, plus a flat-rate benefit. The flat-rate benefit is $176.95 for 2013. Using this formula, the
*maximum*<65 survivor’s benefit for 2013 would be $556.54 (37.5% of $1,012.50 + $176.95) - For a surviving spouse over age 65 (>65), a survivor’s benefit on its own would be 60% of the calculated retirement pension of the deceased contributor. Using this formula, the
*maximum*>65 survivor’s benefit for 2013 would be $607.50 (60% of $1,012.50).

## Combined benefit calculations

Now that you have a basic understanding of how a CPP survivor benefit is calculated on its own, let’s look at how it is recalculated when you are also eligible for a CPP retirement pension.

When combining a CPP survivor benefit with a CPP retirement pension, the survivor’s benefit will be reduced from the regular amount described in Survivor’s benefit calculations above,** **to the lesser of Option A or Option B, as follows:

## Option A

Under this option, the combined survivor’s benefit is an amount that, when added to the survivor’s own calculated (or unadjusted) retirement pension, equals the maximum CPP retirement pension for that year (plus the <65 flat-rate benefit if applicable).

How this maximum amount works is commonly misunderstood. Many people think that if they start their CPP retirement pension early (at a reduced rate), they will be eligible for a higher survivor’s benefit if/when their spouse dies. This is not true, since it is their calculated retirement pension amount that is used when calculating the combined maximum, which is not the same as their actual retirement pension amount, if they started receiving it earlier or later than age 65.

What this means, is (using the 2013 maximum of $1,012.50 for an age-65 retirement pension):

- Someone who started their CPP retirement pension at age 60 (with a 30% reduction) would effectively have a maximum combined benefit of $708.75 for 2013 (70% of $1,012.50).
- Someone who started their CPP retirement pension at age 70 (with a 42% increase) would effectively have a maximum combined benefit of $1,437.75 for 2013 (142% of $1.012.50).

Let’s use an example. Andrew started receiving his own retirement pension at age 60. He is receiving $490.00 per month (based on a calculated retirement pension of $700.00, reduced by 30% for taking it early). His wife dies in 2013, when he is over age 65. Let’s say that her calculated retirement pension is $800.00, so that Andrew’s survivor’s benefit prior to being combined with his retirement pension would be $480.00 (60% of $800.00).

Under Option A however, the most that Andrew can receive as a survivor’s benefit is $312.50 ($1,012.50 minus his own calculated or unadjusted pension of $700.00).

## Option B

Under this option, the combined survivor’s benefit is the normal survivor’s benefit calculation as described in the ** Survivor’s benefit calculations** section above, reduced by the lesser of:

- 40% of the earnings-related portion of the survivor’s benefit, or
- 40% of their own calculated retirement pension

**Note:** By earnings-related portion, I mean the 37.5% or the 60% calculated in the ** Survivor’s benefit calculations** section above.

Using the example of Andrew again, let’s look at how Option B works. As mentioned above, Andrew’s survivor’s benefit prior to being combined would have been $480.00. Under Option B, it will be reduced by the lesser of 40% of itself (40% of $480.00 = $192.00) or 40% of his own calculated retirement pension (40% of $700.00 = $280.00).

The lesser of these two amounts is obviously $192.00, so under Option B, the combined survivor’s benefit would therefore be $288.00 ($480.00 – $192.00).

Since Option A resulted in a combined survivor’s benefit of $312.50 and Option B resulted in a combined survivor’s benefit of $288.00, the lesser of those two amounts is obviously $288.00. Andrew’s combined survivor’s benefit will therefore be $288.00.

## Special adjustment to the surviving spouse’s retirement pension

As if the combined calculation wasn’t complex enough already, there is a “special adjustment” that applies if the surviving spouse started receiving their own retirement pension earlier than age 65. The effect of this special adjustment is to partially offset the actuarial adjustment that was applied to their retirement calculation, for any amount by which their survivor’s benefit is reduced under either Option A or B above.

Carrying on with Andrew’s example above, his CPP retirement pension started at age 60, so this special adjustment calculation does apply to him. His uncombined survivor’s benefit would have been $480.00, but under Option B, it was reduced to $288.00 (a reduction of $192.00 as a result of the combined benefit calculation).

His special adjustment would be calculated by multiplying the amount of this reduction in his combined survivor’s benefit ($192.00) by the actuarial adjustment factor for his retirement pension (30%). The resulting amount of $57.60 ($192.00 x 30%) would be added to his retirement pension of $490.00 as a special adjustment. His net CPP retirement pension would therefore be increased to $547.60 ($490.00 + $57.60), making his net combined benefit $835.60 ($547.60 retirement pension plus $288.00 survivor’s benefit).

## Gold star question!

If you’ve made it to this point of my article and your head hasn’t exploded yet, I’ll give a gold star and a free CPP retirement pension consultation to the first person who replies with the correct combined calculation for the above example of Andrew, if he had still been under age 65 when his wife died. If no one replies with the correct answer within one month, I will provide the answer myself, and a free consultation will go to the person who comes up with the closest answer (and showing all calculation steps).

$851.84

Good article … thanks for posting it.

Cardhu

Thanks for the comment, and thanks for your response to the gold star question. Not the answer that I have, but if you show me how you got your result, maybe I’m wrong?

I must have missed a step … here’s what I did.

Andrew’s own pension is $490.

The basic (uncombined) survivor pension would be 37.5% of $800, plus $176.95 … or $476.95

The Option A maximum I took to be $1012.50 less $700 = 312.50 … (I think this is where I erred?)

The Option B maximum is $476.95 minus the lesser of 0.4 * 700 or 0.4 * (37.5% of 800) … which is 356.95

The lesser of Options A & B was $312.50

Special Adjustment would be 30% of (476.95 minus 312.50) … or 49.34

Total combined benefit of $490 + 49.34 + 312.50 = 851.84

………………………………..

I think I missed a step in Option A … should it be $1012.50 – $700 + $176.95 = 489.45 ?

In that case the combined survivor benefit would be 356.95, and the Special Assessment would be 36.00, so …

Total combined benefit of $490 + 356.95 + 36.00 = 882.95

Any closer?

Cardhu

You win the Gold Star and the free retirement pension consultation!

Just email me at DRpensions@shaw.ca, along with a copy of your current CPP statement of contributions and any “what ifs”. I’ll do the rest.

$833.40

Simke

Thanks for trying to answer the Gold Star question, but as you can see above, cardhu came up with the correct answer.

Only the government could come up with that last bit (the Special adjustment to the surviving spouse’s retirement pension). Every time they tinker they make the calculations more opaque. Good thing there’s people like you who can try to clarify these topics!

I receive a survivor’s pension. I am having troubles figuring out what I will receive from CPP when I retire. It seems foolish to work longer when my own contributions are not fully considered.

Victoria

I can truly understand your concern, and the whole issue of combined benefit calculations does really complicate the decision of when to apply for your own retirement pension.

I can probably help you with calculating your options if you email me at DRpensions@shaw.ca, but I do charge a fee for that service.

In your example and challenge question where Andrew is under the age of 65 when he becomes a survivor and starts collecting the combined benefit of 851.84. WHat happens when he gets to age 65? Does the survivors benefit get calculated again and will it decrease or stay at its current level?

Alan

A survivor’s benefit is always recalculated at age 65, regardless whether it is part of a combined benefit or not.

The basic recalculation formula when it converts from an under-age-65 to an over-age-65 survivor’s benefits is that you lose the flat-rate portion ($176.95 for 2013) but you get 60% of the deceased contributor’s “calculated retirement pension” instead of 37.5%.

For most cases this results in a decrease at age 65, but if the deceased was a maximum contributor (or nearly so) there can be a small increase.

In the above example, Andrew would reduce from the $851.84 combined amount to the $835.60 combined amount.

It’s not a very big difference for Andrew. But for someone born in 1954 thinking about taking early retirement at age 60 in 2014 and is receiving a survivors benefit of 400 and has an estimated CPP benefit at 65 of 900 the difference is over a 100 less per month when he turns age 65. It doesn’t seem right that they would decrease the survivors just when you need it the most?

Alan

You’re right about the survivor’s reduction being greater when the retirement pension is higher. If your age-65 retirement pension were max, you wouldn’t receive any survivor’s benefit at all at age 65 (although you would still be eligible for the special adjustment to your retirement pension, IF you took it early).

I generally try not to explain or defend the government’s rationale for things like this, but the only thing I’ll say is that the CPP was designed as only one part of the social security system. Most people become eligible for OAS/GIS at age 65, and I think that is the explanation for the different survivor’s calculation at age 65.

My wife has been diagnosed with terminal cancer so I have been trying to determine my income level on her passing. Your article is the only trustworthy information I have found on CPP Survivor Benefits. If your calculations under Option B apply, specifically the reduction of 40% of earnings-related portion of survivor’s benefit, then NO-ONE who receives CPP pension will get more than 60% -(40%*60%)= 36% of spouses retirement pension, and under the other calculations could even get less! This is a far cry from the 60% benefit, up to the maximum retirement benefit, that is always quoted by CPP and others.

Am I correct?? In my case the combined benefit would be reduced from 1012.50 to 870.00 by this restriction.

Denis

First, my sincere sympathy for you and your wife. I wish you both the best through this time.

As far as the combined survivor’s benefit calculation, you’re correct insofar as the 36% maximum. The only thing to remember is that it’s 36% of her “calculated pension” (prior to any actuarial adjustment), not necessarily the amount that she’s receiving (if she started in earlier OR later than age 65.

The only exception to the 36% maximum would be if 40% of the surviving spouse’s own calculated retirement pension was smaller than 40% of the deceased spouse’s calculated pension. In that instance, the combined survivor’s benefit could be somewhere between 36% and almost 60% (if their own retirement pension was very tiny).

It sounds like this exception doesn’t apply to you, but I thought I should mention it anyway, just so that the 36% maximum isn’t seen as an absolute figure.

If you wanted to email me at DRpensions@shaw.ca with details of your and your wife’s CPP retirement amounts and start dates, I would be happy to try and validate your $870.00 combined benefit calculation.

To clarify an error in my response above (3rd paragraph), I should have said:

“The only exception to the 36% maximum would be if 40% of the surviving spouse’s own calculated retirement pension was smaller than 40% of the earnings-related portion of the survivor’s benefit.”

In that situation, the combined survivor’s benefit would be reduced by 40% of their own calculated retirement pension and the end result would be somewhere between 36% and 60% of the deceased spouse’s calculated retirement pension.

I hope this helps clarify a muddy situation, rather than muddying it further?

Thank you Doug for your sympathy and all your help in clarifying this awful maze, information about which is not available to the general public except here. Kudos to you for this website.

I am sure that a lot of bereaved people get a shock when they find out how little they get from CPP for a survivor benefit (I came across at least two Toronto Star articles highlighting the problem). For the record you did indeed confirm that my calculation was correct and I will receive $870 and not the $1012.50 which I was previously assuming based on CPP information. Better to know now than later. Thank you.

Thank you so much for this. I have asked both financial advisor and tax accountant for this information. Both did not have an answer.

I have a scenario similar to the ones shown in this article, and wonder if you can help me understand how they apply in my case.

When I was 48, my spouse passed away leaving me with a survivor benefit of 541.41 per month. I’m about to turn 60, and so I’m considering whether I should start collecting my own CPP benefits. I understand that taking my CPP at this age means that my own benefit will be reduced by about 30%, but I suspect that 30% of my earned benefit plus my survivor benefit is close to the $1,038.33 maximum benefit anyways.

I guess what I’m confused about is how my choice to take my CPP at age 60 effects my total CPP benefits … if I can expect to continue receiving 100% of my survivor benefit + 70% of my own earned benefit?

Thanks in advance for your insights on this matter!

Daniel

Unfortunately, receiving 100% of your survivor’s benefit plus 70% of your own retirement pension is never an option under the combined benefit formulas.

When combined, your survivor’s pension will always be reduced by at least 40% of the earnings-related portion of itself or 40% of your own “calculated retirement pension”.

And it would be reduced by more than that if your own calculated retirement pension (ie. the 100%) is close to the maximum of $1,038.33.

If you want me to do some actual calculations so that you know what your choices are, you can email me at DRpensions@shaw.ca. My fee for this service is $75.

Shouldn’t the second paragraph be:

When combined, your survivor’s pension will always be reduced by the lesser of 40% of the earnings-related portion of itself or 40% of your own “calculated retirement pension”.

Adrian

It could be reduced by even more than that if bumping up against the maximum under Option A above.

I take your point though, that the reduction will be at least 40% of the lesser of those two amounts.

Hi Daniel,

I built a spreadsheet that may be able to help you. See http://www.wiseoldcat.com/?q=node/24 . The Excel sheet can be found here. http://www.wiseoldcat.com/sites/default/files/CPP-planningV2.xls . Hope this helps.

Alan

Great work! You lost me with some of what your spreadsheet does, but I played with it a bit and I’m impressed with what you’ve created.

One small point that doesn’t affect the combined total but may be an issue if you’re trying to reconcile with a T4 breakdown, is that the “special adjustment” is actually considered part of the retirement pension amount, not part of the survivor’s benefit.

Well done!

Hi Doug,

Question re: “Now that you have a basic understanding of how a CPP survivor benefit is calculated on its own, let’s look at how it is recalculated when you are also eligible for a CPP retirement pension.”

Does the recalculation apply:

- when you’re first eligible to apply for your own CPP (age 60), or

- at normal CPP retirement age (65), or

- when you actually start your CPP (any age between 60 and 70)?

If the latter, receiving a survivor pension and being well below the maximum CPP contributions may add a powerful argument to the case of not applying for CPP early and delaying it, possibly to age 70, in which case you postpone the reduction of 40% in the survivor’s benefit for some years, while your own CPP is adjusted higher.

Adrian

The combined benefit calculation occurs only once you’re actually receiving both benefits, and I agree with you that this generally changes the breakeven calculations in favour of taking your CPP at age 70.

For some people however, taking it at age 60 isn’t a bad decision, especially if their calculated retirement pension will be decreasing with not working between ages 60 and 65.

What seems to be totally obvious to me (based on all of the calculations that I’ve done) is that if you’re already receiving a survivor’s pension, taking your CPP at age 65 is almost never the best choice.

Hi, I had a friend pass away. She was receiving a survivors pension from when her first spouse passed away. She had since remarried. Is her new spouse eligible for survivors pension on a % of the whole amount she was receiving or would it be calculated on just the CPP pension amount that she was getting on her own?

Thanks

Cindy

Unfortunately, the amount of the survivor’s pension for your friend’s spouse will be based solely on her own contributions, and won’t include what she was receiving for her own survivor’s pension.