Canada Pension Plan enhancements now in effect!

The Honourable Jean-Yves Duclos, federal Minister for Children, Families and Social Development recently shared the following information on enhancements to the Canada Pension Plan (CPP) implemented via the government’s 2019 Budget legislation. These changes are retroactive to January 1, 2019.  

 

We are passing this information on, as it is important for anyone providing one-on-one financial help to people with low incomes planning for retirement and people post-retirement age who may not be getting all the CPP benefits to which they are entitled.  Some of these changes are longer term and designed to benefit Canadians in the future, others will help today. All will help to increase retirement pension levels for those affected. 

 

What do the CPP enhancements mean? 

 

The amounts Canadians pay into the plan will gradually rise between 2019 and 2025. This will help ensure workers and employers can adjust to the modest increase in contributions. Enhanced benefits will gradually grow over time as Canadians work and contribute to the CPP enhancement. For young workers entering the workforce now, the CPP enhancement will increase their maximum CPP retirement pension by approximately 50 per cent. This means workers will receive higher benefits in exchange for making higher contributions. 

 

Who is affected? 

 

The changes will aim to help young workers and future workers the most. Each year of contributions to the enhanced CPP will further increase benefits for workers of all ages. The CPP enhancement will provide more retirement income to all those who work and contribute in 2019 or later. 

 

Additional improvements to the CPP 

 

Five additional CPP improvements have also taken effect January 1, 2019, providing further support to parents, people with disabilities, young survivors, and families of deceased low-income workers. These improvements do not require any further change in contributions. 

 

The newly reformed Survivor’s Pension eliminates age-based reductions and ensures every survivor whose deceased spouse/partner made sufficient CPP contributions will be eligible for a survivor’s pension. Before this change, survivors who did not have dependent children had their survivor’s pension reduced or eliminated, based on their age. Now, anyone under age 35 will be eligible to receive the pension immediately. They previously would have had to wait to age 65 to receive a survivor’s pension. It is estimated that about 40,000 individuals will benefit from this change, about half of them being young survivors who would become eligible to receive their survivor’s pension before age 65. 

 

The Child Rearing Provision supports parents who stop working or reduce their work hours to become the primary caregiver to their young children. In each year while a child is under the age of seven, the CPP enhancement would “drop in” an amount equal to the parent’s average earnings during the five years prior to the birth or adoption of the child -- if that amount is higher than their actual earnings during that period. This increases the pensions of parents who reduce their income to take care of their children. 

 

The Disability Benefit supports contributors by “dropping in” earnings for the years when they received the CPP disability pension. This increases retirement pensions for individuals with severe and prolonged disabilities. 

 

The Death Benefit is now a flat rate benefit of $2,500. This means that the estates of all eligible contributors will receive the same amount, regardless of actual earnings. 

 

The new Post Retirement Disability Benefit supports people with disabilities collecting an early retirement pension up to the age of 65. Beneficiaries who meet the same medical and contributory requirements as for the CPP disability pension will become eligible for the flat-rate portion of the disability benefit ($496.36 in 2019) in addition to the early retirement pension they are already receiving. 

 

Please visit the CPP website for more detailed information on these changes.