For Canadians who have noticed deductions in their paycheque at one time or the other, there is a possibility that one of such deductions are meant for their CPP contributions. Canada’s government has designed the CPP as a retirement income program for employees and their employers, and self-employed individuals in Canada to contribute to the scheme.
What is CPP and how does it work?
Every individual working or who has worked in Canada is eligible to receive certain tax benefits or pension after their retirement. This is known as the Canada Pension Plan (CPP). The CPP retirement pension is paid to beneficiaries for life as a replacement of the regular income.
It is important to equip yourself with detailed information such as the payment date to avoid missing out on your entitlements. Under the CPP 2021 schedule, there is an increase in the employee and employer contributions rate.
The Canada Pension Plan is not automatic. To enjoy the benefits, you must apply with Service Canada. The Government of Canada designs the monthly CPP to replace part of your income, specifically after retirement.
Generally, you must be at least 60 years old and have made valid contributions to the CPP before you can expect to receive CPP benefits. These contributions are either deductions from your earnings or credit received from a former spouse or common-law partner. Since its inception in 1965, the CPP contributory program has played a crucial role in many Canadians’ retirement or disability plan, just as the Old Age Security.
CPP 2021 Payment Dates
Canada Pension Plan (CPP) benefits are scheduled for a monthly payment basis.
There are different payment methods, including cheques or direct deposit. If you set up your CPP payment for direct deposit, your CPP benefits will be deposited into your bank account on the payment dates. Similarly, if you receive cheque payments, your CPP cheque will be mailed to you on the CPP payment dates.
CPP payment schedule for 2021
According to the Canadian government benefits payment dates, here are the CPP payment dates for 2021:
- January 27, 2021
- February 24, 2021
- March 29, 2021
- April 28, 2021
- May 27, 2021
- June 28, 2021
- July 28, 2021
- August 27, 2021
- September 28, 2021
- October 27, 2021
- November 26, 2021
- December 22, 2021
What Is the Maximum CPP Payment?
The amount of CPP you will receive every month is determined by several factors, including:
- Your average earnings.
- Your contribution amount and length of contribution.
- The year you started receiving your CPP payments.
Generally, the standard age to start receiving your CPP is 65, but you can start receiving your CPP benefits as early as age 60 or as late as age 70. Also, there are some provisions for individuals with a disability to receive CPP benefits earlier.
However, you should be aware that if you choose to receive your CPP earlier, you’ll receive a small amount of CPP monthly payment.
Every year, the maximum CPP payout changes. For 2020, the maximum monthly amount you could receive as a new recipient starting the pension at age 65 is $1,175.83, with an average monthly payment of $696.56.
This is an increase from the previous $1,154.58 maximum payout and $679.16 average monthly amount for 2019. In 2021, this figure is expected to increase as a result of the new maximum pensionable earnings released by the Canada Revenue Agency (CRA).
CPP Contributions 2021
To get the maximum CPP amount, you’ll need to increase your CPP contribution, which is determined by the Yearly Maximum Pensionable Earnings (YMPE). The YMPE is the maximum amount set by the Canadian government through the CRA as base contributions to the Canada Pension Plan (CPP) or the Québec Pension Plan (QPP).
In 2021, the maximum pensionable earnings under the CPP will be $61,600. This figure was $58,700 in 2020 and $57,400 in 2019. The new MPE is calculated based on the CPP legislated formula that considers the average Canadian weekly wages and salaries. As a result, CPP contributors (employees and self-employed) who earn more than the maximum pensionable earnings of $61,600 are not permitted to make additional contributions. At the same time, the basic exemptions remain at $3500.
CPP in the Past Five Years
CPP Contributions Rate
In 2019, the CRA launched the CPP enhancement to increase CPP benefits in exchange for higher contributions. The CPP enhancement will increase your contribution rate and MPE up to the year 2025. The enhancement will also increase the CPP retirement pension, post-retirement benefit, disability pension, and survivor’s pension.
For 2021, the CRA has increased the CPP contribution rate for employees and employers to 5.45% each from the previous 5.25% of 2020. Also, the self-employed contribution will increase to 10.9% from the previous 10.5% of 2020.
As a result of the increase in the CPP contributions rate for 2021, the maximum contribution of an employer and employee to the plan will be $3,166.45 each. The self-employed contributions rate will be $6,332.90, up from $5796.00 in 2020.
The combined CPP contributions for employers and employees will be $6,333 ($5,796 in 2020). This figure will possibly increase your current wages or salaries.
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Employer CPP Contributions
CPP Calculators You can Use
How to Apply for CPP Benefits
CPP benefits are not automatically paid to beneficiaries. You must apply with Service Canada in advance if when you want your monthly pension to start.
Before you apply, you must:
- Have made at least one CPP contribution.
- Be at least 60 years of age.
- Have a social insurance number (SIN).
- Have your banking information at hand (for direct deposit of CPP payments).
- Have your spouse or common-law partner’s SIN.
Method of Application
You can complete your CPP payment application via an online application or send in a paper application to Service Canada.
You can complete and submit an electronic CPP application on the Service Canada website with your My Service Canada Account (MSCA). The MSCA will provide an estimate of your CPP monthly payments. You should get a notification between 7 to 14 days after applying.
You can print and complete the application for a CPP Retirement Pension (ISP-1000) form. This can either be sent by mail to Service Canada or drop the form at a Service Canada office near you.
Regardless, you must complete and submit a paper application if:
- You have received CPP benefits in the past.
- You are currently receiving CPP benefits.
- You have been denied a CPP benefit such as disability pension, survivor’s pension, or children’s benefit.
- You live outside Canada.
- You’re applying through an authorized third party with a power of attorney.
Are CPP Benefits Taxable?
CPP benefits are taxable income and must be included when filing your tax returns. Thereafter, you will receive a T4A(P) tax slip showing the benefit amount and the type, and tax deductions.
Other CPP Benefits
You could also be eligible for other CPP benefits, which you can apply for in addition to the CPP retirement pension.