To calculate your CPP retirement pension, the first thing you should do is go online to the My Service Canada site and obtain your most recent CPP Statement of Contributions (SOC).

Also on the My Service Canada site, you can request an estimate of your CPP benefits. These estimates are very accurate if you’ll be eligible for your CPP retirement pension in the next few years. Otherwise, they can be misleading, especially if your future earnings will be significantly higher or lower than your previous average lifetime earnings.

If an estimate of your CPP retirement pension is not accurate enough for your purposes, you can do a more precise calculation of your CPP retirement pension. I’ll explain each of the steps in the calculation briefly in this article, and then you can ask questions if anything is unclear or you need more detail.

**Step 1 – Calculate your number of contributory months (NCM)**

Your contributory period begins either the month after you turn 18 or in January 1966, whichever is later. It ends either the month you turn 70 or the month before the month that your CPP retirement pension starts, whichever is earlier. Your contributory period excludes any month that you received a CPP disability benefit.

Your NCM would simply be the total number of months in your contributory period, minus any months excluded as a result of receiving CPP disability benefits.

For example, the contributory period of someone applying for the CPP at age 65 in 2013 or later, and having never received CPP disability benefits, would be 47 years (from age 18 to age 65). The NCM would be 564 months (47 years x 12 months).

**Step 2 – Calculate your Total Adjusted Pensionable Earnings (TAPE)**

First, find the “Your pensionable earnings” amounts for each year on the SOC that you got from the My Service Canada web site. These are referred to as your Unadjusted Pensionable Earnings (UPE).

For each year, divide the UPE for that year by the corresponding Year’s Maximum Pensionable Earnings (YMPE).

(UPE/YMPE)

The following two links will provide you with a list of all YMPEs since the CPP began in 1966:

http://www.drpensions.ca/cpp-rate-table.html

Next, multiply that result by the average YMPE for the five-year period ending in the year that your CPP will start.

(UPE/YMPE) x average YMPE for five-year period

Example calculation using the year 2013:

The average YMPE for the five-year period ending 2013 is $48,600, based on YMPEs of $46,300 for 2009, $47,200 for 2010, $48,300 for 2011, $50,100 for 2012, and $51,100 for 2013.

($46,300 + $47,200 + $48,300 + $50,100 + $51,100)/5 = $48,600

So if a person had a UPE of $4,000 in 1966, the APE calculation would be:

($4,000/$5,000 (the YMPE for 1966) x $48,600 (the average YMPE for the five-year period ending in 2013)

The resulting APE would be $38,880.

This step effectively brings the earnings for each year up to a current year value. This means, for example, that a UPE of $5,000 in 1966 (when the YMPE was $5,000) is worth the same as a UPE of $51,100 in 2013 (when the YMPE is $51,100) when calculating your CPP retirement pension.

Your Total Adjusted Pensionable Earnings (TAPE) is now calculated by simply adding together all of the APE calculations for your entire contributory period.

**Step 3 – Determine your “dropout” periods**

The two most common dropouts are the general dropout and the Child Rearing Provision (CRP).

**Related article: The Child Rearing Drop Out Provision **

If you are eligible for the CRP, you can drop out any period of time that your children were under the age of 7 and where your APE was less than your average APE. The CRP is done first and then the general dropout is applied.

The general dropout, for which everyone is eligible, drops out a percentage of the lowest remaining earnings in your contributory period. The general dropout percentage was 15% before 2012, has been 16% since 2012, and is 17% starting in 2014.

Example 1: As mentioned in Step 1, for someone reaching age 65 in 2013, the contributory period would be 47 years or 564 months. If they never received CPP disability and weren’t eligible for the CRP, they would use the general dropout to remove the lowest 96 months of APE (564 x 17% = 95.88, rounded up to 96).

Example 2: If the same person from Example 1 was eligible for the CRP for two children born three years apart, that person could drop out up to 10 of those years (or 120 months) under the CRP, plus a further 76 months ((564 – 120) x 17% = 75.48, always rounded up to 76) under the general dropout.

While it’s true that you can drop out any period of time under age 7, there is sometimes a complexity in determining what “less than your average APE” means.

Before I review what this means, you should probably read my article on the child-rearing provision itself. Now that you have a good understanding of who qualifies for the CRP and the difference between CRDO1 and CRDO2, you will better understand how to determine what periods of CRP are less than average.

First, any periods of CRDO1 (where earnings were less than the Year’s Basic Exemption or YBE) are always excluded from someone’s contributory period, because zero is always less than average.

Next, you have to calculate a temporary average monthly pensionable earnings (AMPE) value in order to see which months should be dropped out under CRDO2. To do this, simply divide your total adjusted pensionable earnings (TAPE) by your number of contributory months (NCM), after excluding any periods of disability pension or CRDO1 eligibility as mentioned above.

Any months of CRP eligibility where your adjusted pensionable earnings are less than this temporary AMPE value can now be dropped out under CRDO2, along with the accompanying earnings.

**Step 4 – Calculate your Average Monthly Pensionable Earnings (AMPE)**

First, subtract all of the APEs that you identified in Step 3 as being dropped out, from the TAPE that you calculated in Step 2. For example, if you are dropping out 96 months, you would identify your 8 years of lowest earnings and subtract the APEs for those years from the TAPE. The result of this calculation is the TAPE (after dropout).

If you are dropping out less than a full year of APE, just pro-rate that amount. For example, if you are dropping out 76 months, you would drop out your lowest 6 full years of APE, and 4 months of the next lowest year. When dropping out the 4 months, you would drop out 4/12ths of the calculated APE for that year.

Next, subtract the number of months identified as dropout periods in Step 3 from your original number of contributory months (NCM) calculated in Step 1, to get your NCM (after dropout).

For example, 564 NCM – 96 months dropped out = 468 NCM (after dropout)

Finally, your AMPE is simple math using the formula:

AMPE = TAPE (after dropout) / NCM (after dropout)

**Step 5 – Calculate your retirement for benefit calculation (RTR-FBC) **

This is the easiest step. Just take 25% of the AMPE that you calculated in Step 4.

The result of this step is the amount that your monthly CPP retirement pension will be, if your pension is starting the month after you turn 65.

**Step 6 – Apply any applicable actuarial age adjustment factor**

If you are starting your CPP retirement pension earlier than age 65, decrease your RTR-FBC calculated in Step 5 by the appropriate age factor.

**Related article: How to Get Your CPP Early**

## What happens if you start your CPP after 65?

If you are starting your CPP retirement pension later than age 65, increase your RTR-FBC calculated in Step 5 by the appropriate age factor (now always 0.7% per month).

If you delay starting your CPP until after age 65, there is an additional dropout provision, known appropriately enough as the over-65 dropout (surprisingly, there is no acronym for this dropout.)

Under the over-65 dropout provision, one of two things will happen:

- First, if you are still working after age 65, you can use these earnings to replace any periods of time under age 65 where you had lower APE.
- Second, if you are not working after age 65 or if your earnings after age 65 are less than any of your under-age 65 APE, you can simply drop out all periods after age 65 from both your NCM and your APE.

## Impact of receiving a CPP disability pension

Receiving a CPP disability pension affects the calculation of a CPP retirement pension in two different ways.

First, any period of time when you were in receipt of a disability pension is excluded from your contributory period. For example, if you received a CPP disability pension for 10 years and applied for a retirement pension at age 65, your number of contributory months (NCM) would be 444 (47 years – 10 years x 12 months) and your general dropout would be 76 months (444 x 17% = 75.48, rounded up to 76.)

Second, if your disability pension continues right up to age 65, your adjusted pensionable earnings (APE) is based on the average Year’s Maximum Pensionable Earnings (YMPE) for the year that your disability began, instead of the year that you turn age 65. Your APE is then escalated from that value by any increase in the consumer price index up to age 65.

## Conclusion

If all of the above is too confusing or complex, you can email me at DRpensions@shaw.ca, along with a copy of your SOC and any “scenarios” for which you want CPP retirement pension calculations. (For example, you might want to find out how much your CPP retirement pension will be if you start taking it at different ages, say 60, or 65, or 70.) I charge a small fee for each calculation that I do, but I also guarantee the accuracy of my calculations.

Another informative post that I will email to myself and friends.

I was a stay at home mom for a decade and will be applying for a portion of my ex-spouses credits. I understand it is an easy process even though it will probably make his head explode when I tell him. He managed to go all those years without ever doing a load of laundry, washing a dish or feeding a chicken. The cows always got out when he waa at work and it was always me chasing them.

Every year he received huge tax return cheques because he could deduct me and the children and he used the return for trips and big toys. He will be receiving a huge pension from his employer and won’t miss a bit of CPP.

Jane

I’m glad that you found this article useful. I can understand how you feel about your ex-husband, but you should be aware that a credit split will likely reduce his CPP pension by much more than it will increase yours. I intend to write an article on this subject in the not-too-distant future(I call it the CRDO/DUPE overlap), but if you haven’t already done so, you might want to check out the above link to Jim’s article on the Child Rearing Dropout, and read some of my comments.

A much better solution in this situation (in my opinion) is a negotiated agreement outside of the CPP. That way you can split the difference that the government would otherwise be saving, if you simply apply for a credit split (Division of Unadjusted Pensionable Earnings).

Wow! I’ve been looking for this detailed information for some time. There are hundreds of hand-wavy explanations on the web, but this is the first one I could code up in a spreadsheet. Thanks!

Michael

Glad that you found this article useful for your spreadsheet. Let me know if you need any further explanation for any of the steps, and I’ll be please to assist you in refining your spreadsheet.

Michael

Thanks again for the positive feedback on this article. In reading your own blog, I see that there is one further dropout that I should have mentioned in this article, and that’s the “over-65 dropout.”

I left it out intentionally, trying to keep things a bit simpler and because it used to be that very few people waited beyond age 65 to take their CPP retirement pension.

Basically, if you’re working beyond age 65 at a high income level, you’re allowed to replace an equal number of lower earning months with these after-age-65 earnings. And if you’re not working or working only minimally, you can simply drop out those over-65 months so that it doesn’t reduce your calculated retirement pension.

My apology if this omission has misled you in calculating a breakeven date for waiting past age 65 to start your retirement pension.

Thanks for the article. I used it to build a spreadsheet to compare two scenarios. CPP at 60 and 65. I’m 58 and retiring at 60; will not be working for $ going forward. Currently at the max if taking CPP at 60.

Question; the 65 scenario uses the 5 previous years ending 2020; which will of course be inflated by CPI. To compare apples to apples with “constant dollars” at 65 should I simply use the five years prior to 2015?

Thanks again.

Grant

As far as I’m concerned, I would do both calculations using the 5-year period ending 2013, as those are the only real numbers that you have. If you do try to estimate the 5-year average ending 2015 for your age-60 estimate, I would strongly suggest using the same average for your age-65 calculation. Otherwise you’re artificially inflating your age-65 calculation, and perhaps ignoring that if you choose the age-60 option, it will also be indexed to CPI for those same 5 years

Thanks;

Thought so. When I do that I end up with an age 60 max (before age reductions) of $12,150/yr. which matches the government web site. The amount at age 65 goes down to $11,695/yr. which is the likely impact of adding five years of “zeroes” at the end. So there’s a $455/yr. “loss” due to waiting, which, while minor, will have to be considered as part of the age 60 vs. 65 vs. 70 start date debate.

Gord

Sounds like you’ve got a good handle on it now. Glad that my article helped you to get there! Let me know if you have any further questions.

Very informative, thanks!

I would like to ask 2 questions:

1. In step 3, you’d mentioned “The two most common dropouts are …”, which implies there are other less common dropouts. Would you be able to give more details about these other dropouts, if any?

2. For the CRDO, does it apply to both parents, or only one of the parent is eligible?

Charles

The only other real dropout is the over-65 dropout, where you can either automatically drop out any years after age 65 if they are lower than your average, or if they’re better than your average earnings, you can use them to replace lower years (this dropout is performed after the CRDO and prior to the general dropout). The only other situation that is sometimes referred to as a dropout concerns periods of time in receipt of CPP disability. These periods of time are really excluded from your contributory period, but this has virtually the same impact as dropping those years out when calculating your benefit.

Your question about the CRDO is a bit more complicated, and is a bone of contention for me. Firstly, only one parent can claim the CRDO for the same period of time. In theory, that would be the primary caregiver for the child(ren), but by legislation and in practicality it is primarily the female parent who qualifies.

I intend to do an article specifically on the CRDO in the coming months, so maybe that will clarify the situation for you.

Doug,

Thanks so much for the information.

I look forward to reading your next post about CRDO.

So if I retire at 54 and don’t plan on earning any income after that, and I start my CPP at 70, does that mean I can drop all five years after turning 65 plus nine years (47 x 17%) prior to 65?

Chuck

It’s true that you can drop all 5 years from age 65 to 70 plus the 17% dropout.

The only thing that you have wrong is that 17% of 47 years is eight years, not nine.

I am trying to find out how CPP disability will affect my CPP payment when I turn 65. I am currently 49 and just started CPP disability. The CPP site gives me an estimate of what I would receive at age 65 (just shy of the maximum) but as I will have no income between now and then does this mean I will receive nothing or very little at age 65?

thanks

Cathie

Assuming your condition doesn’t improve and you continue receiving CPP disability until age 65, that entire period of time is excluded from your contributory period (see Step 1 above). That means that the fact that you’re no longer working and contributing (while receiving CPP disability) won’t reduce your CPP retirement pension calculation at all.

This means that the amount showing on the CPP site is probably fairly accurate. But there’s a way of validating that once you receive your first CPP disability payment, by reverse-calculating that disability amount. To do so, take your disability amount, subtract the flat-rate portion ($453.52 for 2013) and divide that result by 75%.

Using the maximum 2013 amounts to demonstrate this procedure, take the maximum disability amount of $1,212.90 – $453.52 = $759.38 = $1,012.50 (which just happens to be the maximum CPP retirement pension for 2013).

Sorry but I forgot one step in my example above!

That should have been:

$1,212.90 – $453.52 = $759.38 / 75% = $1,012.50

Great article Doug – thank-you! My husband had a great opportunity to work overseas – so I’m temporarily retired until I can become fluent in the language here in our new country. I’ve been wondering how this hiatus was going to affect my CPP benefit – now I have the answer! With your easy to follow steps I’ve been able to create an excel spreadsheet to keep track of it all.

I do have one question that I hope you can answer – I have 4 years that qualify for drop out because of the child rearing rules. But I still have some earnings in those years. Do I specifically have to drop those years – or can I choose my years where I had zero earnings?

Valerie

Glad to hear that this article helped you to understand and calculate your CPP retirement pension. Unfortunately, you do have to drop out the specific periods that apply to the child-rearing dropout (CRDO). Here is a link to another article that I wrote on that very subject: http://retirehappy.ca/child-rearing-dropout/

Very helpful, thanks. I have a question about how the dropout is treated in the first year of the contributory period. By way of example, suppose a person’s contributory period starts July 1 of a particular year, and that earnings are minimal in that first calendar year so that the period qualifies as dropout. Would those earnings be counted as (i.e. use up) six months of dropout or a full year?

Glen

For the first year of your contributory period (and for the last or any partial year), it is the actual number of months that are dropped.

In your example (for a person born in June, whose contributory period starts in July), they would use up 6 months of their dropout period if they had low earnings in the year that they turned 18.

By the same token, in determining whether those earnings are lower than average and should be dropped, the earnings would be pro-rated when comparing them to a full year of earnings. Thus $10,000 of earnings in that first year would be equivalent to $20,000 in a full year, in determining what months to drop.

I’ve worked through the calculations and think I’ve ‘got it’ but one thing nags at me…

I’m planning to take CPP at 60 so that’s 42 contributory periods. Subtract the drop off periods (will be 17%) and I’ve got 34.8 years (418 months) of required contributory time. Currently I’ve got about 23Ms and ~7 partial years that are equivalent to approx. 2 more M years. So ~25Ms out of 34.8 required for the max (at 60).

My question is with what I’ve got so far as far as qualifying contributory periods, if I don’t work (say for the next 10 years) will I lose some of what I’ve got to date? That is, does what I’ve built up so far stay as a constant so I won’t get less than that amount?

OR by not working are you eroding your balance? I understand that by working for the next ten years I would get more added (get closer to the max for age 60) but does not working actually erode what you have accumulated to date?

Shannon

It sounds like you do have a good understanding of how the CPP calculation works. Congratulations!!

Having 10 years of zero earnings will certainly reduce your CPP from what it otherwise could be, but you’ve already taken that into consideration in your formula of 25/34.8.

If you are using the Service Canada estimates however, 10 years of future zero earnings will reduce those results. That’s because the System Canada system averages your current earnings over your current contributory period (25/(32-17%), which would give you a near-maximum estimate. The only way to maintain that estimate is to maintain the same average earnings until your pension starts.

Make sense?

Doug,

Thanks for making the calculation details available – the Service Canada website doesn’t seem to give correct info when you use their retirement calculator and change the future earnings. I feel much better being able to know the real impact on CPP of working or retiring early.

One more thing – As we don’t yet know the future YMPEs, I made an assumption that that it would rise by approx. 2% over the previous year. I used that to calculate a 5 yr average for retiring in 2024.

Shannon

I agree that it’s very important to be able to figure out how much your CPP will be under various scenarios, and I also agree that the current version of the Service Canada website doesn’t always do that accurately.

As for escalating the value of future YMPEs, I prefer to just use the 5-year average ending 2013, even when doing future calculations. That way it keeps the results relative to my current spending needs. I agree that your method probably gives you a more accurate result in 2023 dollars, but I’d be a bit concerned about how meaningful that number is for current retirement planning decisions. Just two different schools of thought is all.

Hi Doug,

I am 57 years old and 2013 is my last year of CPP contributions. My intention is to start CPP at 60 in February 2016. How do I calculate average of 5 years. Would 2014 and 2015 be zero or I take last 5 years from 2013.

Richard

If you check out the previous question from Shannon and my reply to her, you’ll see that my recommendation when you’re estimating a future pension is to use the 5-year average ending in 2013. That way, your result will be comparable to the current maximum of $1,012.50, and it will be meaningful compared to today’s prices.

When your benefit is actually calculated in 2016 however, you will use the 5-year period ending in 2016.

This is very similar to my situation, but it’s not making much sense to me. I plan to stop working at 55, so the 5 year average before I turn 60 (or 65!) will be zero. Does that mean I will recieve no CPP?

Very helpful web page by the way. Thanks!

Ian

The 5-year average refers to the average of the YMPE for the 5 years ending with the year that your benefit starts, not to the average of your own earnings for those same years. Retiring at age 55 will definitely reduce your age-65 CPP retirement pension, but only because that means that you’ll have at least 10 years of zero earnings, which exceeds the gneral dropout (which will soon be 17% or 8 years for an age-65 pension).

This means that you might want to consider taking your CPP before age 65, and before your zero earnings starts to reduce your “calculated retirement pension”,

I can do some actual calculations for you (for a fee), if you email me at DRpensions@shaw.ca, along with a copy of your recent CPP statement of contributions.

My husband is at the maximum CPP allowance but will continue working after age 65 and contribute if allowed. We aren’t clear if there is any advantage until waiting until 70 to start collecting? If he waits, can he collect more than the maximum benefit or does the maximum not increase which means he will collect the same amount regardless if he takes it at age 65 or 70?

Kaye

If your husband delays starting his CPP beyond age 65, his “maximum benefit” will increase by the 0.7% per month factor, based on his increasing age. If he’s currently at the age-65 maximum however, it will NOT increase based on any additional contributions that he makes after age 65.

If you haven’t already read them, I’m attaching links to two other articles that I wrote on this subject:

http://retirehappy.ca/contributing-to-cpp-after-age-65/

http://retirehappy.ca/cpp-for-the-over-65-and-still-working/

If you want me to do any detailed calculations for your husband (for a fee), email me at DRpensions@shaw.ca.

Hi Doug. Do you know if if would qualify for any CPP benefits as i only worked for a short period of time before i got married and raised my kids and never returned to work. I’m 51 years old and wonder if it would be worthwhile to go back into the work force for a few years in order to qualify or will it not make much difference?. Thanks

Ingrid

If you worked and paid into CPP for even one year, you will be eligible for a CPP retirement pension, although the amount of that pension may not be very much. It will however be larger than otherwise, due to the fact that you were raising children for some of the years that you weren’t contributing.

The best place to start is by calling Service Canada at 1-800-277-9914 and asking them to mail you a copy of your “CPP Statement of Contributions”. That will show exactly what you have contributed to CPP, and it will estimate your CPP benefits. The estimates will be on the low side, as they don’t consider the child-rearing dropout.

Once you have your statement though, you could email it to me at DRpensions@shaw.ca and I can do some accurate calculations for you (for a fee), including some advice on how any future earnings would affect your pension amount.

Hi, I’m 63 and thinking of stopping work when I’m 64 in June and using my RRSP until I’m 65 and then collecting my CPP and OAS. is that the best method? I’ve been told if I wait until I’m 65 and don’t use my RRSP my OAS will be reduced?

Jay

Unfortunately, it’s not quite as simple as a Yes or No answer.

Firstly though, I should clarify that the only time that RRSP income will reduce your OAS is if your total income exceeds the clawback threshold (approx. $70,000). Here’s a link to one of Jim’s articles that explains this issue a bit more: http://retirehappy.ca/minimizing-old-age-security-clawback/#comment-29429 .

The other way that RRSP withdrawals can affect you however, is by reducing your eligibility to GIS (Guaranteed Income Supplement). That is an add-on benefit to the OAS program, intended for low income seniors. Here’s a weblink for more info on GIS: http://www.servicecanada.gc.ca/eng/services/pensions/oas/gis/index.shtml

The decision of when to start your CPP is totally separate from OAS, and I can only give you advice on that if I have a look at your complete CPP statement of contributions, and do some calculations for you (for a fee). If you’re interested in that, email me at DRpensions@shaw.ca.

Hi Doug,

Thanks for all the valuable information!

I’ve used the Service Canada Pension Estimate tool. It says “If you were 65 today, you could receive a monthly retirement pension of $600″. But, now I’m 55 … planning to retire say tomorrow. I won’t be working and contributing to CPP from 55-65. When I start collecting CPP at 65, will I get $600 per month or less? Will the amount decrease as I’m not working from 55-65? Many thanks.

To Fu

If you don’t contribute for the next 10 years, your CPP at age 65 will definitely decrease from the $600 that your CPP statement indicates.

Whether it will decrease by just a bit or by quite a lot, depends on how steady your earnings are from age 18 to age 55. If your earnings were steady for all 37 years around 60% of the YMPE, your estimate of $600 would still be fairly accurate. If you already had several years of zero earnings though, the decrease could be up to about $125 monthly.

If you want me to do some detailed calculations for you (for a fee), email me at DRpensions@shaw.ca

Thanks very much for your advice.

One of our readers recently advised me that one of the two links that I provided for the historical YMPE figures was out-of-date. I checked, and he was right!

I therefore created my own version of the CPP rate tables (including YMPE), and it is now available using this link: http://www.drpensions.ca/cpp-rate-table.html

Service Canada has a Retirement Income Calculator that makes an estimate on CPP payout. I’m planning to retire early, and am trying to estimate the effect of early retirement on CPP payout.

The Service Canada estimate is pretty high compared to the result I get using the algorithm described here– about $900 vs $650. I’ll have about 20 years at max CPP contribution and about 10 years averaging about 50% of max CPP.

I’ll re-check my calculations to see if I’ve messed something up. If anyone has any comments on the reliability of the Service Canada site in the meantime, I’d be interested in hearing it….

Roy

You obviously haven’t read my recent article on Service Canada’s retirement calculator. Using it is sort of like using a random number generator, except then you’d know not to expect any accuracy!

Here’s a link to my article: http://retirehappy.ca/online-cpp-calculator/

If you want any help to ensure that you have accurate numbers (for a small fee), email me at DRpensions@shaw.ca

I’ve been looking for this calc all over the net for a project at work and you’ve saved me hours of time! Thanks a bunch!

Lara

Glad that I could help you. You can send the cheque to …

Also Doug, If a person waits to age 70 to start CPP would there be any enhanced widowers pension to the spouse or is the widowers pension just based on the age 65 pension?

Dave

The amount of the survivor’s pension is the same whether the deceased started his/her retirement pension early or late. It is always based on the age-65 calculated retirement pension.

I am now 67 and have been receiving my cpp for 4 years. I am still working and will retire for good in a year or two. Will my cpp increase when I retire?

Ron

Your regular CPP pension will never increase (except for the annual cost-of-living increases), but if you have made any contributions since 2012, you should be eligible for post-retirement benefits. Have you made contributions for 2012 or 2013?

Will the 6-step calculation on your website change if you entered Canada after 1966 (for eg. NCM etc.)? I am 67 and wanted to check if the CRA has calculated my pension correctly

Lloyd

Unfortunately, for CPP purposes it doesn’t matter when you entered Canada. Everyone’s contributory period begins either at age 18 or Jan 1/66, whichever is later.

Just FYI, CRA collects the CPP contributions but Service Canada calculates and pays the CPP benefits.

If you’re receiving your pension, I can validate your pension calculation for $25, if you email me at DRpensions@shaw.ca

I would like to clarify how the first and last years are treated in the calculation. Let’s use the example of someone who’s birthday is in April and turned 18 in 1967. I understand that the NCM for 1967 would be 8 and the NCM for 2014 would be 4. However, I don’t understand if I also must scale the APE for those years. For example, the APE for 1967 is multiplied by 8/12 and the APE for 2014 is multiplied by 4/12. If I don’t then the TAPE value is wrong, no?

In this case, would it not be true that for someone who contributed the maximum in both 1967 and 2014, that they have contributed more than they are being given credit for?

Ron

Good questions, and slightly different answers at both ends.

For someone that turned 18 in April/67, their maximum pensionable earnings for 1967 would have been 8/12ths of the YMPE of $5,000 = $3,333 and that’s all that they would have contributed on. Their adjusted pensionable earnings would be calculated in the normal manner to $33,227 for a pension starting in 2014.

Assuming they applied for their CPP when they turned age 65 in 2014, their maximum pensionable earnings for purposes of the calculation would be 4/12ths of the 2014 maximum of $52,500 = $17,500 and their adjusted pensionable earnings would be $16,613.

If their actual earnings for 2014 is more than $17,500 they have two choices. First, they can continue contributing on earnings up to the $52,500 amount and anything over $17,500 will be used to calculate a post-retirement benefit (PRB) that would become payable starting January 2015, OR they can file a request with Revenue Canada and their employer to stop making CPP contributions after their CPP pension starts.

Thank you for the formula for CCP calculation – the explanations and examples are the most useful we were found on the Web! One question we have not seen is about the effect of deferring CPP for a month or two for those who become eligible late in the year? We have had no pensionable earnings since retirement at age 57. We turn 60 in October, November 2014 respectively. Would starting CPP in January 2015 mean that the calculations would be based on the 2011-2015 5-year average YMPE, which would increase the current value of contributions (Adjusted PE) from the 2014 level?

Diane

You are 100% correct that starting your CPP retirement pension in January would result in a higher pension as a result of the higher average YMPE, but starting the pension in December gives you the full yearly CPI increase for the cost-of-living. It’s usually fairly close which gets you the higher net benefit, but there have been a few years when one alternative was clearly better than the other.

Hi Doug, I’m turning 60 in July 2014, I only worked from 19 to 20 yrs old ,and then raised 4 children , so my CPP that I paid it would be like maybe 15.00′, but would I be eligible for the child rearing dropout program.

Cathy

Yes, the child-rearing dropout (CRDO) provision will certainly help you, but unless you work and contribute more now, your CPP pension still won’t amount to very much. The CRDO simply allows you to “drop out” Low income years when your children were under age 7. This increases your average lifetime earnings and thereby increases your CPP pension. But if you only have those 2 years of contributions, the CRDO will probably only double your pension calculation.

Just wanted to say thanks for the article and answering all these peoples questions. You are obviously a kind an intelligent person. Have a good day and I wish you the best.

Ivan

Ivan

Thanks for your very kind comments!

You have a typo on the above page — Related article: The Child Reading Drop Out Provision

If everyone is eligible for the general dropout is the dropout already calculated into the CPP SOC? Or does the government wait to apply it at retirement. Currently, I am eligible for $590/month at 65. I am just trying to figure out if that already includes the general dropout or not. Thanks for some GREAT articles.

Jane

That’s a very good question!

Yes, the SOC calculation does include the general 17% dropout, or at least partially. For instance, if you’re 50 years old now, your contributory period would currently be 32 years (from age 18 to 50) or 384 months, so the SOC calculation would drop out your lowest 66 months (17% of 384 = 65.28, rounded up to 66).

I was 51 Feb of 2014. I have been on CPP disability since 1995 March and still am. In March 1995 my CPP disability was $720 a month. At age 65 what CPP retirement should i hope to receive approximately? With Old Age Security given now at my age 67(last month of any adjustment), there is no gains and i will have two years of CPP only. Do you know if the government is making adjustments for people like me that were permanently disabled before changing OAS rules and GIS that goes with it? Thanks!

James

I wish that I had better news for you, but under the current legislation your disability pension of $720 will convert to a retirement pension of approximately $350 at age 65.

I’ve wondered myself whether the government will do anything to help people in your position, but I haven’t heard about anything in that regard

James

Further to my earlier reply, I now see that you said that your disability pension was $720 in 1995. That means that it should now be about $1,030 in 2014, and if so it will convert to a retirement pension of approximately $763 when you turn age 65.

Thank you thank you thank you…

I finally found the exact formula from your website and was able to put it on a spread sheet for what-if calculations. Thank you again!

kimberly

I just turned 60. I started working part of my 19th year and have paid the maximum CP premiums every year since I turned 20 until December 2013 when I retired. except for one year when there was no CPP contributions made due to being off work on Worker’s Compensation (approx. 1 year). I am not sure if the year off work reduces my CPP benefit. Also, if I read it correctly, will My CPP benefits decrease with each month/year that I don,t apply for them, or will they increase until I collect them at age 65? I’m still not sure.

Norman

If you have 39 years of maximum earnings (which it sounds like you do), you will receive a maximum CPP retirement pension for whatever age you apply.

The one year when you were on WCB will be part of your dropout period, along with the years when you were age 18-19 and the years since 2013.

Factoring in the pension reduction for early retirement, and annual inflation, am I further ahead applying for my pension now at age 60 or would I still take a big hit even factoring in my maximum CPP deductions I made for 39 years?

At age 60 it takes 35 maximum contribution years to get the max reduced amount.

At age 65 it takes 39 years to get the maximum unreduced amount.

You state you have 39 years of max contributions (I take it that’s after the drop out) If you are in good health your life expectancy is age 82. There may be other reasons why you want/need it early but if you do take it early – in my opinion, you’ve thrown away 4 years of entitlment. On the other hand for a person who has less than 35 max years its likely a reason to take it early because you are just adding zeros to the calculation and therefore the reduction is actually greater than the stated factor… but even then there may be reasons not to take it early.

In deciding to take it at age 60 or 65 inflation (in my opinion) is not relevant. But inflation is very relevant once you take it, so ask yourself do you want inflation applied on the reduced amount for life or on the unreduced amount.

Norman

Using the 2015 age-reduction factor of 0.58% per month for taking CPP early, the “break even” period is about 9.4 years. That means that you’re better off taking it early if you don’t live past age 74.4 and better off waiting until age 65 if you live longer than that.

Hi,I have been on disability for over 2 years,first short term and now long term. My employer tells me they cannot accomodate the restrictions indicated by an assessment the insurance company ordered.I have just turned 57 and contributed maximum CPP for the past 20 years.I worked part time from 1982-1996 as I had 4 children.If I am deemed not capable of working at all how will my pension be calculated? Thank you

Donna

If you haven’t already done so, I suggest that you apply immediately for a CPP disability pension. If approved, your retirement pension calculation at age 65 will exclude any period of time while you’ve been in receipt of CPP disability. If you don’t apply or aren’t approved, those years of zero earnings might reduce your CPP retirement pension calculation, and you might therefore want to apply for your CPP retirement pension at age 60.

Im turning 60 this month (September 2014).

I have been working since 1976. I have approx

21 years of M contributions. CPP Calculations

show my 2014 contributions as zero. Even

though I have been working full time steadily since

1976. Is it advisable for me to start receiving my CPP

as of age 60 or delaying it. If I start at age 64 I do

get higher CPP.

Thanks,

Angela

I’d need to see your entire CPP record to give you any qualified answer to your question. If you want to have me do some calculations for you (for a fee), email me at DRpensions@shaw.ca

Hi, Really helpful information! Thanks to take time answering our questions!

I was immigrate to Canada when I was 30 with a kid 1.5 years old then when he was 8 year old I have second child. My question is:

1. how I should caculation NCM? should that start from I immigration to Canada?

2. How many years CRP I should count on? 12years?

3. I have max pensionable earning for all the years since I came to canada, my husband has much less income and sometime parttime after we have the second child, Who should claim CRP in this case to max. the CPP?

Thanks!

Amanda

1) Your contributory period starts at age 18, even though you weren’t in Canada at that time. So start counting your NCM at age 18.

2) Your CRP could be 5.5 years for the first child and 7 years for the second child, so 12.5 years in total (but only if your APE during each of those 12.5 years was less than your lifetime average APE.

3) If you had max earnings since your arrival in Canada, the CRP won’t help you at all. The CRP may help your husband, but he can claim it only if he received the family allowances and/or child tax benefit for the children OR if he was the primary caregiver and you waive your rights to the CRP in his favour.

Great article.

What impact does working in the US for 8 years have?

Paul

Working in the US for 8 years would have no impact on your CPP benefit at all, except that would presumably be 8 years that you didn’t contribute to CPP.

I’m age 60. Fulltime Pastor at our Church. QUES: What is the approx. impact to CPP Receivable at age 65 for every $1,000 of Clergy Residence Deduction that reduces my CPP Pensionable Earnings below the Maximum in the next 5 years?

Ron

It’s impossible to answer your question accurately without seeing your entire lifetime record of CPP earnings, but one way of estimating the possible impact is by using the fact that each year of max earnings is generally worth about $25 towards an age-65 CPP retirement pension.

For 2014, that means that every $1,000 decrease from the max of $52,500 could reduce your age-65 CPP retirement pension by about 50 cents per month.

The 2014 Yearly Max Pensionable earnings is 52500 so if you only contribute on 51500 your max contribution (and credit) is reduced by approx. 2%.

1000/52500 – .019

I will be 64 next month,,,, I have been receiving cpp disability since 94,,, presently getting $1,117.24 per month,,, am wondering how much that amount will decrease when I convert to cpp???

I’m turning 65 on Dec 6 2015,,,, I presently am receiving cpp disability at the rate of $1117.24,,,, how much will this be reduced when I convert to Canada pension plan??

Bob – Your CPP disability pension will convert to a CPP retirement pension at age 65, and the amount will reduce to approx. $879.52 effective January 2016.

Thanks Doug,,,, very helpful,, then I top that off with OAS which I believe to be about $550,,, correct added together maskes $1429, which is more than I am getting know,,, is that right?? Thank you,,, also,,, I understand the switch from disability is automatic,, but I have to apply for OAS,,, how soon should I apply for OAS thanks

Bob – Yes, OAS is currently $563.74 if you have at least 40 years of residence in Canada after age 18. You may also receive your OAS automatically since you’re already receiving a CPP pension, but if you haven’t received a letter saying so by next June/July, I would apply then.

Does anyone know the CPP (CPI) increase for 2015?

Dave

I’m guessing that it will be 1.7%, but I haven’t seen it released anywhere officially yet.

Monday 29th… I see now that it’s just been announced at 1.8%.

Dave

Thanks for sharing this info!

Here’s a link to the official news release: http://news.gc.ca/web/article-en.do?nid=916899

Hi, Doug, very helpful info…

I only start contributing when I am about 30 years old, (some 12 years with 0 contribution.) after the automatic/ general drop out, I would still be having a number of years without contribution, if I work pass 65 to 71, those extra years would replace my 0 contribution years, correct?

Thanks

Steve

You’re right that any contributions past age 65 can be used to replace lower earlier years, but that’s only until age 70, not 71.

Since the general (17%) dropout will allow you to drop out 8 of those 12 years, working until age 69 would allow you to replace the other 4 years with your higher earnings now.

Hi Doug

Nice article, much appreciated, but I have two questions.

1.I can not find any info on the government site about the over 65 double dropout. At 65 I will have used all my 8 years of dropout and I am considering waiting until age 70. DO I use A or B for this calculation?

A 1,945,088.10 / 528 * 42% = 1,307.78

B 1,945,088.10 / 468 * 42% = 1,475.44

2.Two people receiving maxium benefit with same situations, one started benfits 2012 (986.67), the other 2015 (1065.00). Would 2012 be receiving the same amount (1065.00) in 2015 if taken the 986.67 and add inflation or would that still be less than 1065.00? Because benefits are increased by percentage, would the 2015 person be pulling larger and larger benfits than the 2012 person in the same year?

Evan

1. Assuming the $1,945,088 is your TAPE after dropout, your CPP retirement pension at age 70 would be:

$1,945,088/468*25% = $1,039.04 x 142% = $1,475.44.

2. If someone received the maximum of $986.67 in 2012, that would be escalated to only $1,031.71 by 2015. This amount is less than someone who receives the maximum starting in 2015. This is because pensions in pay are indexed based on price increases as measured by the CPI, and new pensions are indexed on wage increases as measured by the YMPE.

Hi Doug,

I have lived in Canada, worked and contributed to CPP for about 19 years. I had an opportunity overseas and am currently working in Switzerland. I just turned 60 in December 2014. I plan to continue to work in Europe for about four more years. Should I apply now (or as early as possible) for my CPP, or should I wait until after my retirement? Please advise.

Regardless of when I should claim CPP, I would like to have an idea about the amount of my pension payout and would be interested in your assistance for the calculations after I request a copy of my CPP Statement of Contributions form Service Canada. What would the fee be?

Consuelo

I would be pleased to do some calculations to help you decide when to apply for your CPP. My fees are $25 for a single calculation, $75 for the six calculations of ages 60-65 or $125 for the eleven calculations of ages 60-70.

If you are interested in this service, email me at DRpensions@shaw.ca

Doug,

Thank you. I will contact you as soon as I receive a copy of my CPP Statement of Contributions from Service Canada. As I have three children, i wonder if somehow the the Child Rearing Dropout (CRDO) provision would also help me? I remember having received a child allowance when my children where small, but I cannot remember for how long. Where can I get this information and would you need it in order to do my calculations?

Consuelo

Yes, the CRDO will help you if you were still living in Canada while your children were under age 7. All you should need to know is your date of departure from Canada.

Thanks again, Doug. I will be in touch. I have not received the Statement of Contributions yet. I was told it would take a few weeks, but will follow-up if I do not hear from them in the next few days.

You can register for a cpp account online which will give access to all of your info.

If you retire in your 50’s and you withdrwal $15,000 from your RRSP each year until your 65, does that 15k of annual income count as earned income in terms of counting towards your CPP benefits?

Mark

The short answer to your question is “No”.

The only income that counts towards CPP benefits is earned income from employment or self-employment.

Dear Doug,

First of all, thank you! Amazingly clear information and the most detail I could find anywhere.

I do have one question related to the calculation of CPP when one is on a CPP disability pension until age 65, when it reverts automatically to the CPP retirement pension, as this is my own situation.

You have said above: “Second, if your disability pension continues right up to age 65, your adjusted pensionable earnings (APE) is based on the average Year’s Maximum Pensionable Earnings (YMPE) for the year that your disability began, instead of the year that you turn age 65. Your APE is then escalated from that value by any increase in the consumer price index up to age 65.”

In my situation, I started receiving the CPP disability pension in February 1991 so the YMPE for 1991 is 30,500. Using your chart, the escalation factor for 1991 is 1.048, so do I actually apply the escalation factor for 1991 to the 1991 YMPE and then go forward from this amount? That is, would it be 30,500 x 1.048 = 31,964 for 1991? And then I would applying the subsequent escalation factors for each year to this base amount? So, if I am 65 in 2015 the adjusted amount would be 51,348 versus the actual YMPE of 53,600?

This is the only part of your explanation that I’m a bit confused about and I really do want to make sure CPP calculates this correctly as the information I got when I phoned in was totally incorrect.

Thank you again for this amazingly detailed explanation. There is absolutely no other site on the Internet with the details necessary to check CPP’s calculations and phone information.

Much Gratitude!

Jo-Ann

Jo-Ann

Glad to hear that you found this article mostly useful, but sorry for any confusion.

In your situation, you would adjust all of your earnings up to a 1991 value using the average YMPE for the 3 years ending with 1991 ($29,033) and then start applying the CPI increases starting with the 1992 increase of 1.058.

An easy way to estimate what your retirement pension will be when it converts from a disability pension at age 65 is to subtract the flat-rate portion of the disability pension (which is $465.84 for 2015) and divide the result by 75%.

For example, if your current CPP disability pension is $1,000 it would convert to a retirement pension of approx. $712.21 if you turned age 65 in 2015 ($1,000 – $465.84 = $534.16 / 75% = $712.21).

Email me at DRpensions@shaw.ca if any of this is unclear.

Dear Doug,

Thank you for the fast reply!

I actually don’t retire until June 2017 but kept the example calculation simple.

The rule of thumb you provided is a great way to quickly check CPP’s calculations.

Right now they are show me with an estimated pension of $471 on my online account which is crazy as my disability is $1,172.75 and when I phoned in last year the person I spoke with said my retirement pension would be much lower as I hadn’t worked for so many years… clearly they didn’t know these years are dropped out!

So thank you so much again, and if I need some help I will certainly be hiring you to do some calculations for me.

And I will absolutely be referring you to all my friends!

Jo-Ann

Jo-Ann

I find that amazing that their online estimate doesn’t consider the fact that you’ve been on a CPP disability pension since 1991, and it’s very disappointing that they couldn’t provide a better response when you phoned Service Canada.

Hi again Doug!

Yes… I also find it amazing that they do not seem to have taken it into account and you can see why I was thrilled to find your site and do the calculations myself.

I just went into my account a few minutes ago to get the numbers for you… this is the exact information given on the site for me as of today:

If your pension were to begin next month… you could receive a monthly retirement pension of: $398.06

If you were 65 today… you could receive a monthly retirement pension of: $471.97

Disability Benefits: Our records show you currently receive CPP disability benefits.

As you can see, they know I am on disability and as I mentioned, I get $1,172.75 per month CPP disability pension so was shocked by the numbers I was seeing… and, as mentioned, when I called last year, the person on the phone was absolutely no help.

If you know people in the department, you might like to let them know that there is a BIG problem with their program estimates for people receiving the disability pension!

I can only imagine how upset some people might be when they check their CPP estimates, if they are on a disability pension, and then phone and don’t get the right information.

Thanks again and keep up the good work!

Jo-Ann

I have a copy of my CPP SOC. The numbers are correct, they reflect my actual Pensionable Earnings and my actual paid Contributions. However, in yrs 1995 to 1997 inclusive, I am listed as being “S” self-employed. Will this affect my CPP payout when I retire? Do I need to get this corrected, or, in that the numbers are correct it won’t make a difference? FYI I won’t be retiring for 15 years, but I don’t want to leave this error that long if it will have an impact on the numbers.

Irene

If the earnings are correct, there is no need to worry about the “S”. The “S” probably means that you had more than one employer those years and were under-deducted for your CPP contributions because both employers would have deducted for the Year’s Basic Exemption. When you filed your tax return for those years, you would have had the option to make up any shortfall in contributions, and that would have been done at the self-employed rate.

Hi Doug, when I look at my CPP on my account on the government page, I see my contributions made for specific years then parallel to those numbers are higher numbers under pensionable earnings. so in 2004 I contributed $54.98 then my pensionable earnings is like $5,123.56. I don’t understand the 2nd set of numbers. Could you explain what the 2nd set of numbers mean? Thanks

Valerie

Valerie

For the purpose of calculating your CPP, the important number is your “pensionable earnings” column.

That number should match your actual salary and/or self-employment earnings for that year unless you under-contributed to CPP, in which case it would be the amount of earnings that your contribution would support.

Very informative Doug.

I am retiring next month at 60 years of age. I have worked full time from age 18 and always paid the maximum into the CPP. Am I right to believe that I can wait until I am 65 to take out CPP and have no penalty applied as I will have the 8 years of drop out to apply to those 5 years. I will use some of my rrsp while being taxed at a lower rate and move some to a tfsa if not needed.

Thank you.

Gerry

Gerry

Yes, if you have 39 or more years of maximum contributions, you will always qualify for a maximum CPP retirement pension at any age, as the general (17%)dropout will allow you to drop out your lowest 8 years at age 65.