We recently hosted an educational webinar on the Canada Pension Plan (CPP) - with Michelle Munro, Director of Tax and Retirement Planning at Fidelity Investments - explaining how it works and the key factors to consider on when to start taking it.
Below we have summarized some of the key points from the presentation. If you have any questions, please don’t hesitate to reach out.
Overview of CPP
The Canada Pension Plan is a government retirement income program, designed to replace a portion of your employment income once you stop working. You contribute during your working years and receive monthly payments in retirement based on how much and how long you contributed.
Key Facts
The standard age to begin receiving CPP is 65, with a maximum annual benefit of approximately $17,000. If you start earlier, your payments are reduced by 7.2% for each year before age 65, while delaying can increase your benefit by 8.4% per year, up to age 70. All benefits are indexed.
Illustrative annual benefits:
- At age 60: ~$11,000
- At age 65: ~$17,000
- At age 70: ~$24,000
Break-even Ages & Longevity
Given that the average life expectancy is 84 for men and 87 for women, delaying CPP can lead to greater cumulative payouts for many.
- Starting at 60 vs. 65: Break-even at ~age 74
- Starting at 60 vs. 70: Break-even at ~age 79
- Starting at 65 vs. 70: Break-even at ~age 82
Strategic Considerations
When to begin CPP is a personal decision that depends on your situation. During the session, four main decision factors were presented:
- Health status and life expectancy
- Tax implications
- Cash flow and spending needs
- Desire to “get money back”
Reasons to Take CPP Early
- Guaranteed income sooner (“bird in the hand”)
- Flexibility to enjoy early retirement years
- Health concerns or shorter life expectancy
Reasons to Defer CPP
- Payments increase 8.4% per year until age 70
- Larger income base that is inflation protected
- Government-guaranteed and actuarially sound
- Expect to live into your 80s or beyond
Death and Survivor Benefits
- The CPP Death Benefit is a one-time lump-sum payment of $2,500, which is taxable to the estate. The executor is responsible for applying within 60 days of death and processing typically takes about three months.
- The CPP Survivor Benefit also provides ongoing monthly payments to the surviving spouse or common-law partner. For those age 65 or older, the benefit equals 60% of the deceased’s pension; for those under 65, it’s approximately 55%. Importantly, the combined total of a survivor’s own CPP and survivor benefit cannot exceed the maximum CPP amount and the benefit is taxable to the survivor.
Special Provisions
Child-Rearing Dropout Provision: If you took time off or worked part-time while raising children under age 7, CPP allows you to exclude those lower-earning years, which may increase your benefit. Supporting documentation (e.g., birth certificates) is required.
International Work (Totalization Agreements): Canada has reciprocal agreements with many countries — including the U.S., U.K., and Germany — allowing people who worked overseas to combine their years of contributions and receive one consolidated payment.
A Few Words on the Old Aged Security (OAS) benefit.
The session was focused on the CPP but some time was allocated to the Old Aged Security benefit.
CPP vs. OAS
| Feature | CPP | OAS |
| Funding Source | Employee/employer contributions | General tax revenue |
| Typical Annual Benefit | ~$17,000 (at 65) | ~$8,000 (at 65) |
| Stability | Fully funded and regularly reviewed | May face demographic pressures over time |
Highlights
- OAS eligibility begins at age 65 and can be deferred until 70 with annual enhancements of 7.2%.
- The OAS benefit is determined by residency history. If you’ve been in Canada for 40 years you get the full benefit. If you’ve been in Canada for fewer than 40 years you get a prorated amount. 20 years of residence (20/40) = 50% eligibility.
- The OAS is income tested with a claw back starting at an individual income of $93,454 and fully ineligible at $152,062.
- There is no OAS survivor benefit.
- The strategic considerations of when to take the OAS are like those of the CPP mentioned above.
- For more insight on how Canadians are examining and approaching retirement, please read The 2025 Fidelity Retirement Report.
If you have any questions, please don’t hesitate to reach out.
Bryan Deviney, CFP, CIM
Senior Financial Advisor
Assante Capital Management Ltd.
Bryan Deviney is a Senior Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact him at 416.216.6500 or visit www.bryandeviney.com to discuss your particular circumstances prior to acting on the information above. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization.
The case study mentioned in this presentation is provided for illustrative purposes only and does not represent an actual client or an actual client’s experience, but rather is meant to provide an example of our process and methodology. The results portrayed is not representative of all of our clients’ experiences.
