Online Guide to Canada Pension Plan (CPP) and Old Age Security (OAS)

I’ve been writing about CPP and OAS for a long time now.  In fact, my most popular articles in terms of traffic and views are my articles on CPP and OAS.

Here’s a guide to CPP and OAS because of all the attention these programs are getting as a result of pension reform in Canada.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace.For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

27 Responses to Online Guide to Canada Pension Plan (CPP) and Old Age Security (OAS)

  1. Can you tell me where I can find the forms for receiving CPP while working. I am unable to locate them on the Revenue Canada web site.
    Thank you.

  2. Does it make sense for a business owner to continue to contribute to CPP? If only dividends are received as income there is no requirement to contribute to CPP. Inflation went up 2% last year yet CPP contributions for 2012 increased by 4% tO $4,613 for the self employed. The tax rate on the first $500,000 of active business income is only 15.5%. Instead of conrtibuting to CPP the money could be invested within a corporate structure in tax efficient investments. During retirement income could consist partly of dividends and other sources of income that would not be fully taxable. RSSP/RRIF income and CPP would be fully taxable. Any thoughts on this approach?

    P.S. I am not a big fan of RRSPs for business owners and professionals.

  3. How true?? that if you leave Canada and reside abroad for 1 day less 6 months that you have to come back to Canada and stay 6 months in order to continue receiving your CPP retirement benefits? if it is true, Is there penalties if you exceeds 6 months stay abroad?? Please comment.

    • Ed
      There is absolutely no connection between where you live and your eligibility for any of the CPP benefits. I think you’re getting confused between CPP and OAS (Old Age Security).
      For OAS, there are restrictions on where you reside, IF you have less than 20 years of residence in Canada, after age 18. Even then though, it’s not as simple as 1 day less than 6 months of absence. It is true that your OAS benefit will be suspended (if you have less than 20 years of residence in Canada as described above) if you leave Canada for more than 6 months. Ongoing eligibility however, depends on where you actually reside, rather than any specific amount of presence in Canada. Residence is defined as where you “make your home and are ordinarily present”.
      Even if you have more than 20 years of residence in Canada as described, eligibility for the GIS (Guaranteed Income Supplement) is suspended if you are absent for more than 6 months, but ongoing eligibility for GIS also depends more on where you reside than simple presence in Canada.
      So, it’s not as simple as you suggest. But CPP is NOT affected by whether you are either present or resident in Canada, so rest easy on that point!

  4. Hello,
    we are 50 Years old and will become permanent residents in Canada next year. We have private Pension plans in Austria but we also want to have a pension plan in Canada. What are the best options for us?

    Thanks/regards
    Wolfgang

    • Wolfgang
      Welcome to Canada!
      The two public pension plans in Canada are the Old Age Security (OAS) and the Canada Pension Plan (CPP).
      OAS is earned at the rate of 1/40th of the full basic amount (approx. $550/month) for every year of residence in Canada after age 18. Since you’re arriving here at age 50, that means that you’ll be eligible for 15/40ths (or approx. $206.25/month) at age 65.
      CPP is a contributory plan, based on your employment income. The retirement pension payout is based on your average lifetime earnings in Canada. The current maximum CPP pension is approx. $1,000/month at age 65, but that requires at least 40 years of contributions at the maximum level (currently based on earnings of approx. $50,000/year). If you work and contribute to CPP after your arrival, you could again be eligible for approx. 15/40ths of the max CPP (approx. $375/month).
      I hope this helps a bit?

  5. Dear Doug.

    Thanks a lot for your infos, that is very helpful. I have another question.
    My wife and me will arrive together, so that will apply to both of us then?
    I will be self employed when I come, can I then pay into the CPP for the next 15 years and do you know how much that contribution per month will be?
    Furthermore, I am eligible for a European Pension which I will claim once I reach 65 and I also have a private Pension but I still would like to pay into any other Canadian Pension plan. Do you have any good suggestion in this respect, any good product in Canada that you would suggest? Maybe I would want to take the money from the private insurance out and pay it into the Canadian plan, if there is a good option.
    Appreciate your input.

    Cheers Wolfgang

    • Wolfgang
      Yes, both your wife and yourself could qualify for both the OAS and the CPP.
      If you’re self-employed, you must pay CPP contributions of 9.9% of your net earnings up to $51,100.
      Aside from that, you are allowed to save up to 18% of your earned income into what is known as an RRSP (Registered Retirement Savings Plan). This is basically a tax-deferral opportunity, allowing you to set this money aside and invest it with no taxes payable until you withdraw it in your retirement years, presumably when your income and subsequent tax bracket are lower.

  6. Dear Dough.

    I have one last question, thats very important to know.
    If I am self employed I must pay 9.9% into the CPP of my net earnings up to $ 51,100
    Does that mean that the $ 51,100 would be the maximum that one can pay per year into the CPP? If one would pay so much into the CPP for instance in my case from age 50 to age 65, how much would I get then per month once I retire? Well, I definitely will not be able to pay such a high amount but it would be interesting to know.
    I think I would probably be able to pay in maybe $ 1000 per month, how much would I get out then? Or is the maximum that one can get always $ 1000 regardless of how much you pay in?

    • Wolfgang
      I’m sorry that I’ve confused you a bit. It’s not that you pay up to $51,100 in contributions, it’s that you only contribute on earnings up to $51,100.
      That means that the maximum CPP contribution for a self-employed person is about $4,700 (9.9% of $51,100).

  7. I receive my company pension and also work parttime. CPP is only deducted from my lower parttime salary. I will be working 5 years parttime and apply for CPP at 60. Will paying lower CPP contributions these last five years affect the amount I receive? If so am I best to top up CPP on my combined income on my yearly taxes?

    • Pauline

      What Dave says below, about not being able to “top up” your part-time earnings to maximize your CPP is entirely accurate. Now whether or not (and by how much) these 5 years of low earnings will reduce your CPP depends on your entire CPP contributory record.

      I could do some calculations for you (for a fee), if you email me at DRpensions@shaw.ca.

  8. Deae Sir,
    I have less than 20 years of risidence in CANADA, after age 18. If I leave Canada and live in another country more than 6 months without contacting with CANADA service.
    What will happen to my benefit when I return CANADA ?
    Thank you,

  9. Long Ngo

    Advise Service Canada that you’re leaving! Your OAS will be suspended after 6 months, and will be reinstated when you resume residence in Canada.

  10. Hi, guys – I have worked 27 years at my current job, and have always earned enough to pay the maximum CPP contribution. In the late 1980′s, the bookkeeper here made a mistake and for two or three years instead of deducting the maximum CPP, she deducted a few pennies less, so my CPP statement does not have “M” beside those years. I phoned the CPP people at the time to ask if this would affect my eventual CPP payment and they said no, but now that I’m at retirement age, and reading your helpful information, it appears to me that I will be detrimentally affected by this mistake. Is there any way of fixing this since I basically did pay the maximum CPP in those years? Many thanks ..

    • Hi, guys – Since writing my question, I’ve looked further at my CPP statement and your website, and I see that for the two years concerned, 1990 and 1991, my CPP statement states the Year’s Maximum Pensionable Earnings as $28,895 and $30,496, respectively, whereas your chart shows the figures as $28,900 and $30,500 – just a few dollars more. The CPP I paid (that was deducted by my employer) those years was $574.08 and $632.40 – not sure if those were the maximums, and if not, how far off they are. If only a few dollars short, can I “top up” the amounts now to get my “M” for those years?
      Thanks again.

      • Pat

        The maximum CPP contribution was $754.20 for 1990 and $632.50 for 1991, so it appears that your bookkeeper did under-contribute for you in those years. You would have to file amended tax returns for those years in order to raise those contributions to maximum, and I think you’re well beyond the time limit for doing that through Revenue Canada.

        The good news is that there will be a very minimal impact on your CPP amount anyway. I calculate that even if those 2 years have to count, the impact if you were age 65 this year would be a reduction of $0.01 monthly.

        • Hello !..I have lived in Canada for more then 40 years , but if I decide to live abroad for more then 6 months , will my CPP and OAS pensions be affected ?.. Is there some deduction ?…I am confused with this !.. Thank you !… Regards !. FERNANDO

          • Fernando

            CPP is never affected by leaving Canada and OAS is affected only if you have resided in Canada for less than 20 years after reaching age 18.

            If you have lived here for 40 years, the only thing you would need to be concerned about is GIS, which stops if you leave Canada for more than 6 months.

  11. I was reading some of the question and answers,quite helpful.I have question .I am a 59 turning 60 in January 2015.In the past I had three times myocardio and twice angioplasty.I have eyesight problem plus foot problem, cannot go to work regurly due to health issues.Worked 22 years in Canada.Due to health issues I had to go on early retirement.I have my RRSP and Investment with Sunlife.I like to withdraw my RRSP and Investment as I am going through financial hardship,Please suggest or advise how I can withdraw my fund.
    Thanks

  12. I have been a full time homemaker on and off for most of my married life. The years I did work (some full time, some part time) have resulted in an estimated CPP of about $2200 a year when I reach 65. Using the child drop out provision may increase that a little.
    I stopped working altogether when I reached 55 and have no intention of returning to the workforce.
    As my husband’s income is such that I don’t really need the small payout that an early CPP would give me, is it better for me to wait until 65 to collect or should I still apply at 60?

    • Dorothy

      Depending on how many children you had and what your earnings were while they were under age 7, the child-rearing provision (CRP) may increase your CPP by more than you think.

      If you want to base your decision on actual numbers, I could do some calculations for you (for a fee) at ages 60, 65 and 70.

      If you’re interested in this, email me at DRpensions@shaw.ca

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