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.
Related article: The 4 Most Common Questions About CPP
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)