Canada Pension Plan – How stable is it?

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:

Interesting Facts:

• It is the 10^th 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://connectwealthp.wpengine.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.