Canadian workers rightly assume that the Canada Pension Plan (CPP) will be there for them when they reach retirement. In honor of this expectation we thought we would dig a little deeper into this national program. Here is what we found:
- It is the 10th largest pension in the world ($392 Billion as of March 31st)
- It is run as an independent entity (not government run)
- 10.2% of an employee’s income (up to $57,400 (2019)) goes to CPP (split equally between employee and employer)
- There are five (5) departments that oversee 25 mandates
- It currently has projected pension stability for the next 75 years
- There is a lot of great information on this web-site http://www.cppib.com/en/ such as:
- Investment Philosophy
- Investment Performance
How much will you receive when you retire?
- The CPP is a contributory plan. This means, it depends on how much you have put into the plan during your working career
- The maximum CPP (2019) is $1154/mo
- This amount adjusts annually for inflation
When should you start taking your CPP?
- There are several factors to consider:
- Your life expectancy
- Your marginal tax rate when you start taking CPP
- Your current age
- The penalty or bonus from CPP
- If you are below age 65 and start CPP you are penalized at a rate of 0.6% per month (7.2% per year)
- If you are over age 65 you get bonused at a rate of 0.72% per month (8.4% per year)
- In other words, it can pay to wait
- If you would like to run some “what-if” scenarios, check out our web-site. https://www.singerolfert.com/resources/#cpp-calculator
CPP is currently a well-run, stable pension plan that will provide pension income for Canadian workers for a long time to come.