On December 15, 2009, several changes to the Canadian Pension Plan (CPP) became law with the passing of Bill C-51. These new changes will be gradually phased in over five years starting in 2012.
The changes will have no impact on you if you are already receiving a CPP retirement pension, disability benefit, survivor benefit or combined benefits, or if you will begin to receive these benefits in 2010. If you collect CPP prior to 2011, your CPP will be grandfathered under the current rules.
Back when the rule changes were first proposed, I wrote an article on the proposed changes to CPP. It’s worth reading again.
Now that the changes have formally been accepted, If you are between the ages of 60 and 65 and plan to take-up your Canada Pension early, you should consider how the new changes to CPP may influence your decision. There is a short window of opportunity to determine the best course of action for you.
Taking CPP early
Under the current rules, you can take CPP before 65 but at a reduced rate of 0.5% for every month prior to your 65th birthday. That equates to 6% drop in CPP each year prior to 65. Taking CPP at 60 would mean a 30% reduction.
Under the new proposed rules, the percentage to reduce your CPP will increase from 0.5% to 0.6%. Simply put, that means they are going to hit you harder for taking CPP early. To give you incentive to take CPP later, they are increasing the enhancement rate post 65 to 0.7%. The message is simply CPP want to discourage you from taking CPP early and encourage you to leave it longer.
For those of you that are between 60 and 65 and have the opportunity to collect CPP early before these new changes come into effect, you should take a hard look because waiting could mean less money for those taking CPP before 65.
A window of opportunity
I can’t stress enough the importance for those age 60 to 65 who are contemplating retirement and collecting CPP in the next year. There is a window of opportunity to be grandfathered under existing rules. You should take the time to see if it is better to be under the current rules or the new proposed rules for 2012. (SEE COMMENTS BELOW)
Other relevant articles
Lots to know about Canada Pension Plan (CPP) – CanadianFinanceBlog.com
The Four Most Common Questions about Canada Pension Plan (CPP) – CanadianFinanceBlog.com
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Your blog stated the changes will have no impact on you if you are already receiving a CPP retirement pension, disability
This is not what is listed on Service Canada website, it states in 2012, cpp contributions mandatory for employees age 60 to 65 who work while receiving CPP retirement pension?
Janice. You are correct. The part that is grandfathered is the amount you will collect. If you are taking CPP early prior to the implementation of the new rules, you will continue to get the same income (indexed adjusted) but if you go back to work (because you had to stop working to collect in the first place), then you will have to pay into it again. But the new contributions will also increase your future benefit.
The point I was trying to make is the reduction by taking it early is only 0.5% per month as opposed to 0.6%. When I re-read my article, I was not clear on this point so thank you for raising the issue. Also know that CPP is phasing in the reduction as opposed to going right to the 0.6% immediately (which was not clear when I first write the article). That means rushing to take CPP early before the changes are implemented in 2012 is not urgent anymore.
Thanks again for your comment.
I will be 60 in January 2012. Can i collect my CPP and still keep on working.
Denise
Yes, that is one of the changes effective Jan 2012. As of that date, you can apply for a CPP retirement pension without the need to “wholly or substantially retire”. Another change however is that if you do continue working is that you MUST continue contributing to CPP if you’re under age 65, and you MAY contiue contributing if you are between 65 and 70.
can i get cpp pension at 53 yrs old iam on odsp right now
Gerald
You can only receive CPP at age 53 if you have a “severe and prolonged” disability. Severe is defined as being “incapable regularly of pursuing any substantially gainful occupation” and prolonged is defined as being “indefinite and long continued, or likely to result in death”.
I am a single 60 year old woman with a full time job is it worth it to take early cpp and invest it. I am not sure when i will retire or I may lose my job due to downsizing
If I claim my CPP at 60 and I must continue to contribute until I am 65, can I write that off on my Income Tax.
Barry
You can always deduct your CPP contributions from your taxable income, so YES, you can deduct contributions that you continue to make after starting your CPP retirement at age 60. These extra contributions will also create additional “post-retirement benefits” or PRBs, in addition to whatever retirement benefit you start receiving at age 60.
Hi let me just say that this government is just screwing the small person every chance they get. No wonder no one wants to vote anymore why vote they will all screw you the same.
I started collecting cpp at 61
and continued working till 65
how much will cpp increase over
the 4 years.
Randy – The answer to this question depends mostly on when you reached age 65. Prior to 2012, once you started receiving your CPP retirement pension, you no longer contributed to CPP and your pension therefore wouldn’t ever increase (except for the annual cost of livng increase). Since 2012, contributions are mandatory to age 65 and optional between age 65 and age 70, regardless whether you’re receiving a CPP retirement pension.
So, when did you reach age 65?
Please tell me what is the maximum CPP one can receive ?
If a person is 65yrs and still working and contributing to CPP, is there any benefit. (PRB)
What is the reason for not contributing at age 65-70.
Errol
The maximum CPP depends on the age at which you start receiving it. The published max of $1,012.50 for 2013 applies only to a pension starting at age 65. The max for a 70 year-old in 2013 would be 142% of that amount, or $1,437.75 monthly.
PRBs are payable for any contributions made after you start receiving your retirement pension. Here is a link to an article that I wrote on this subject for over-65 contributions: http://retirehappy.ca/contributing-to-cpp-after-age-65/
And since the subject is somewhat confusing yet very important, here is a 2nd link: http://retirehappy.ca/cpp-for-the-over-65-and-still-working/