The Pension Benefits Act in Canada
The Canada Pension Plan (CPP) provides all Canadians over 65 years of age with a modest monthly income. Widowed Canadians and those with no other source of income or savings receive a monthly supplement in addition to their basic pension. The CPP also offers parents monthly benefits after each child, as well as disability pensions for those unable to work due to physical or psychological ailments.
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History
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Prime Minister Lester B. Pearson's Liberal government enacted the Canada Pension Plan in 1965 in order to provide a degree of financial security to all retired Canadians. The original CPP legislation underwent major revisions in order to broaden the scope of those eligible for benefits and to make the system more equitable. Between 1966 and 1986, successive Liberal and Progressive-Conservative governments exempted Canadians raising children and those with low incomes from mandatory CPP contributions, as well as expanding benefits for widows and making it possible for divorced Canadians to split their pension credits after separation.
In 1987, Progressive-Conservative Prime Minister Brian Mulroney allowed Canadians to start claiming benefits starting at 60 years of age and permitted widows to continue receiving their supplemental pensions even if they remarried.
Contributing to the Canada Pension Plan
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All adult Canadians must contribute to the Canada Pension Plan if they are employed, or if they have any other income totaling more than $3,500 per year. Employed Canadians pay 4.95 percent of any annual income above $3,500, but less than $42,100. The rate for self-employed Canadians stands at 9.9 percent. Employees in the public or private sectors must pay 50 percent of their CPP contributions from their monthly salaries, while their employers cover the second half. When deductions exceed the maximum CPP contribution required, employees receive a refund after filing their annual taxes.
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Federal Retirement Benefits
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The maximum monthly payment that any retiree may receive from the federal government as a retirement benefit is $934. Canadians eligible to receive a widow's pension receive a supplemental amount each month. The goal of the CPP's retirement benefit is to ensure that all Canadians obtain at least 25 percent of the income they received while employed. In order to become eligible to receive a retirement pension, Canadians are required to contribute to the CPP on at least one occasion.
Early Pension Benefits
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While most Canadians receive their pensions after turning 65 years of age, the Canada Pension Plan makes it possible to retire at 60. In order to enjoy early pension benefits, the applicants must be unemployed or have a salary that does not exceed $934 per month. Those who wish to receive the pension earlier must ensure that they do not work for one month before claiming their benefits. According to the Canada Pension Plan, however, those who claim their benefits at 60 years of age receive a smaller amount that those who wait until 65 years or later.
Quebec Pension Plan
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Canadians residing in Quebec receive a portion of their pension benefits from the provincial government. Quebec's pension plan is managed by the province's Ministry of Employment and Social Solidarity. While employed or self-employed Quebec residents are required to contribute to the pension plan, anyone who obtains benefits for their underage children is exempt from their payment obligations. Quebec residents who choose to receive a retirement pension at 60 years of age can expect a maximum of $654 per month.
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References
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