The Canada Pension Plan is a mandatory federal pension system that collects contributions from workers and employers, then pays monthly retirement income to people who contributed during their working years.

The Canada Pension Plan (CPP) is not a savings account in your name. It is a pay-as-you-go system: money collected from current workers and their employers goes directly to pay current retirees. You build contribution credits by working and having CPP deductions taken from your paycheque. The amount you receive later depends on how many years you contributed and how much you earned during those years.

CPP is run by Service Canada, a federal agency. You do not apply to CPP the way you apply to other programs — you become part of it automatically when you start working in Canada. Your employer deducts your share (5.95% of earnings in 2024, up to a maximum) and contributes an equal amount. Self-employed people pay both shares themselves (11.9%).

CPP is separate from Old Age Security (OAS), which is another federal pension based on age and residency rather than work history. Many retirees receive both.

Key Takeaways

  • CPP contributions are taken automatically from your paycheque if you work in Canada; you build credits toward a future pension with every year you contribute.
  • You can start receiving CPP as early as age 60 or as late as age 70, but the monthly amount is permanently lower if you start before 65 and permanently higher if you start after.
  • The amount you receive depends on your average earnings over your contributing years and how many years you actually contributed, not on how much you paid in total.
  • You must contact Service Canada to start receiving CPP; it does not happen automatically when you turn 65.
  • CPP continues for life, and your surviving spouse or dependent children may receive survivor benefits if you die.

How Much You Contribute and When

CPP contributions start when you turn 18 and work in Canada, and they stop when you turn 65 or when you stop working, whichever comes first. Your employer withholds your share from every paycheque. In 2024, you contribute 5.95% of your earnings between $3,500 and $68,500 per year (these dollar amounts change annually). If you earn less than $3,500 in a year, you do not contribute that year.

Self-employed people must register with the Canada Revenue Agency (CRA) and pay both the employee and employer portions. You can deduct the employer portion as a business expense on your tax return.

If you work in more than one job or for multiple employers in the same year, you might overpay CPP. You can claim the overpayment back on your tax return, or it will be refunded automatically if you file taxes.

How Much Pension You Receive

Your CPP pension is calculated using a formula that looks at your average earnings over your entire working life, with some adjustment for years when you earned less or did not work. Service Canada drops out your lowest-earning years (currently up to 8 years) to account for time spent raising children, going to school, or being unemployed.

The maximum CPP pension in 2024 is about $1,300 per month for someone who starts at age 65 and contributed at the maximum level for their entire working life. Most people receive less. The average CPP pension is roughly $750 to $850 per month. These amounts change every January based on inflation.

Your actual pension depends on three things: how many years you contributed, how much you earned during those years, and what age you decide to start receiving it. If you contributed for only 20 years instead of 40, your pension will be roughly half. If you earned below the maximum threshold most years, your pension will be lower than the maximum.

When You Can Start Receiving CPP

You can start CPP as early as age 60 or as late as age 70. The age you choose permanently changes your monthly amount. If you start at 60, your monthly pension is about 36% lower than if you started at 65. If you start at 70, your monthly pension is about 42% higher than if you started at 65.

This trade-off means that starting early gives you more total money sooner but in smaller monthly amounts, while starting late gives you fewer months of payments but in larger amounts. The "break-even" point is roughly age 77 or 78 — if you live past that age, you will have received more total money by waiting until 70 than by starting at 60.

You do not have to stop working to receive CPP. If you work and receive CPP before age 65, your earnings above a certain threshold ($6,500 in 2024) will reduce your CPP payment dollar-for-dollar until you turn 65. After 65, you can earn any amount without losing CPP.

How to Start Receiving Your Pension

CPP does not start automatically. You must contact Service Canada to request it. You can apply online through My Service Account, by phone at 1-833-537-4342, or in person at a Service Canada office. You can apply up to four months before the month you want your pension to start.

When you apply, have your Social Insurance Number (SIN) ready and be prepared to confirm your date of birth and address. Service Canada will review your contribution record and send you a letter showing your estimated monthly amount. Processing usually takes 4 to 6 weeks. Your first payment arrives the month after your application is approved.

If you are not sure whether you have enough contribution years to receive CPP, you can request a Statement of Contributions from Service Canada. This document shows every year you contributed and how much, and it helps you decide when to start.

CPP and Taxes

CPP payments are taxable income. You must report them on your tax return each year. Service Canada sends you a tax slip (T4A(P)) in February showing how much you received the previous year.

If your total income is low, you may not owe tax on your CPP. If your income is higher, you may owe tax. Some people choose to start CPP later partly because the higher monthly amount still counts as income, but spreading it over fewer years of retirement can result in lower total tax.

If you are a Canadian resident living outside Canada, you can still receive CPP, but you must report it to the CRA and may face different tax rules depending on your country of residence.

Survivor and Disability Benefits

If you die before starting CPP, your estate receives a one-time death benefit (currently up to $2,500). If you were receiving CPP when you died, your surviving spouse or common-law partner may receive a survivor's pension, and your dependent children under age 25 may receive children's benefits.

CPP also includes a disability benefit (CPP-D) for people under 65 who cannot work due to a severe and prolonged disability. This is a separate program with its own application process and medical requirements. You must have contributed to CPP for at least two of the last three years (with some exceptions) to may have access to.

Frequently Asked Questions

What if I did not work in Canada for my entire adult life?

You can still receive CPP based on the years you did contribute. However, your pension will be lower because it is calculated on your average earnings over a longer period that includes zero-earning years. Service Canada drops your lowest-earning years, but only up to a limit. If you contributed for fewer than 3 years total, you may not receive any CPP.

Can I receive CPP if I am still working?

Yes. If you are 65 or older, you can work and receive CPP at the same time with no reduction. If you are under 65 and receiving CPP, your pension is reduced by $1 for every $2 you earn above $6,500 per year. Once you turn 65, this reduction stops.

What happens to my CPP if I move outside Canada?

You can continue receiving CPP anywhere in the world. However, you must keep Service Canada informed of your address, and you may face different tax rules depending on your country of residence. Some countries have tax treaties with Canada that affect how your CPP is taxed.

Can I change my mind after I start CPP?

You can request to stop receiving CPP and restart it later, but only once and within a limited time frame (usually within six months of your first payment). If you restart, your pension amount recalculates based on your new start age. This option is rarely used because the rules are strict.

How do I know if my CPP contributions are being recorded correctly?

Request a Statement of Contributions from Service Canada online or by phone. This document shows your contribution record year by year. If you spot an error, contact Service Canada immediately — you have a limited time to correct records from past years.