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The Canada Pension Plan (CPP) is one of the two major retirement pension benefits in Canada’s public retirement income system. It is a taxable, monthly benefit system in Canada that replaces nearly all legal residents’ income when they retire.

Although CPP constitutes a significant part of Canadian’s retirement income, many Canadians don’t have a full conception of this pension plan. Our article is going to share some bits of information that might help you to have a better understanding of this plan.

things to know about Canada pension plan

The inception of the Canada Pension Plan

Canada experienced a sudden economic growth in the 1950s and 1960s. As a result, some prominent government programs started to improve senior citizen’s financial status. First, the Liberal government prime minister Louis St. Laurent established Old Age Security (OAS).

Later, two more programs were introduced by Liberal government Lester B. Pearson: Canadian Pension Plan in 1965 and the Guaranteed Income Supplement (GIS) in 1967.


An automatic saving program

Since its inception in 1965, CPP is a compulsory program. It is a great initiative taken by the government. People, by nature, don’t want to save. They spend and waste according to their will and whim. The automated system of CPP helps people to be tension free about their savings.


Canada Pension Plan assets investment

The Canadian government established the Canada Pension Plan Investment Board in 1997 to manage the CPP fund’s assets. Today, the fund assets have crossed 350 billion Canadian dollars in investment on behalf of 20 million Canadians. This is the ninth biggest pension fund in the world.

This massive amount of money is invested in some profitable companies. According to Wikipedia, the noteworthy investment includes-“50% of American luxury department store chain Neiman Marcus,50% of Australian office tower development International Towers Sydney, 50% of the American pet store chain Petco,  40% of the Ontario Highway 407 toll highway,21.5% of South Korean discount store chain Homeplus, and 19.8% of multinational media corporation Entertainment One

A sustainable plan

Many Canadians often fear that the CPP may no longer exist when they retire. According to CPPIB, the plan will at least sustain for 75 years. So you may stop worrying about the plan’s sustainability in your lifetime.


What here for Millennials

Millennials have brighter pension future with CPP than their parents. They are going to get a higher figure than their parents and grandparents. They will get 50% more pension than today’s retirees.

As you can see, the plan is pretty solid for the future generation.

How much CPP will I get

This is a big question. The CPP amount depends on how much one earns during his/her career and how much he/she pays into the plan. The maximum recorded pension is $13,370 per year.

If you have a 39-year working career with high earning, then you may hit that marks. The average amount is around $679.16.


The best time to start CPP

This is a tricky question. Some say it’s better to take CPP early. Some say it’s profitable to defer it. It’s a rather personal question. It depends on that person’s current income, health condition, marital status, life expectancy, and other things.

In general, if you start collecting CPP at 60, you will lose $3,600 over the five years. If you delay to 70, you will get to receive extra an extra $4,200.

The best time to start CPP

Eligibility for Canada pension plan

Two things need to have to be eligible for CPP-

  •     You need to be at least 60 years old.
  •     You have to make one valid contribution to the pension plan.


The Bottom Line

Every Canadian should think through the time they are going to take the plan. The plan could be more effective if you plan to make it to the right time. The problem is the right time is not the same for everyone. We discussed some of the cases in our previous article.

The plan will be more lucrative in the near future. That’s good news for the young generation. I don’t think there is anything to worry about the program.

If you want to know more about the Canada pension plan, give us a call.