December 10, 2010 – In May of 2009, the federal government announced a number of changes to the CPP that will take place through 2014. The first wave of changes is set to occur staring in January 2011. The notable changes starting in 2011 increase the incentive for Canadians to delay retirement past 65, by allowing employer and employee contributions to continue, as well as raising the additional benefit percentages.
Working Past 65
As of 2011, there is an increased incentive for delaying retirement beyond age 65 up to age 70. If you decide to work past age 65 and delay your CPP benefits until the end of 2011, you’ll receive an additional 6.84 percent of benefits (or 0.57 percent for each month you delay). This incentive will steadily increase until 2013, when you’ll receive an additional 8.4 percent for each year you choose to wait. Under the old rules, you would have received an extra 6 percent per year. Once the rule is fully implemented, if you retire at 70, your CPP benefits will be 42 percent higher than if you had retired at 65 (instead of 30 percent higher under the old rules).
Retiring before 65
Consistent with adding an incentive to delay retirement, the new rules discourage early retirement by cutting your pension by 7.2 percent for each year in retirement before age 65 by 2016. Starting in 2012, the decrease per year will be 6.24 percent. Under the old rules, your pension would have been cut by 6 percent. So, once the rule is fully implemented, if you retire at 60, which is the earliest you can collect CPP benefits, your monthly benefit will be cut by 36 percent (instead of 30 percent under the old rules).
To read more about the expected changes, click here
Keywords: CPP, retirement