Receiving CPP Benefits

By PAIP Canada staff

Having received many comments and questions from the article published two weeks ago, this week we’re going to cover the receipt of Canada Pension Plan (CPP) benefits.

As a reminder, the article from two weeks ago covered the upcoming CPP enhancements which will be phased in over the next two years (2024-2025).

            For those who were not aware, CPP benefits go far beyond simple retirement benefits. For those who qualify, benefits can be extended to a variety of situations which include losing a spouse (or parent), and when one becomes disabled.

            Additional CPP benefits include survivor benefits and disability benefits for those who qualify.

            The most common question that arose was how benefits were treated for tax purposes… Given that the basic CPP contributions provide a tax credit (to workers) and the enhanced benefits offer a tax deduction, there is bad news: all CPP benefits are taxable to the recipient at their marginal rate of tax (MRT).

            The second question that came up most often had to do with the age of eligibility for each benefit.

            Although the plan most prevalently offers benefits to retirees, there is no minimum age to receive benefits for those who qualify. Retirement benefits are available as early as age 60 and as late as age 70.

            Regarding disability benefits, once a person qualifies, they will receive benefits until age 65, but will then transition into receiving retirement benefits. In many cases, they will experience a decrease in the total amount received. At the current time, only disability benefits generate unused RSP contribution room as they’re provided to replace one’s earnings.

            For those who lose a spouse or parent, it’s possible to receive a survivor benefit. For the spouse, the amount is dependent on their age and the past earnings of their partner. For the child of the deceased, either under age 18, or between the ages of 18 and 25 and attending post-secondary education on a full-time basis, the benefit is a flat monthly amount indexed to inflation each year.

            As previously explained, all amounts are taxable at one’s MRT and there’s no age limit to receive benefits – young or old should they qualify.

            In an ideal environment, we want to qualify for retirement benefits, and eventually a survivor benefit as well (for those who are married), but hopefully avoid the other benefits altogether. If however one requires these benefits, then at least they’re available.