Did you know, that when you retire you are entitled to receive a monthly payment from the Canadian government? This is due to the Canadian Pension Plan^* (CCP), first instituted in 1965.

What exactly is the CCP?

The CCP is a compulsory scheme whereby all employed Canadians, ages 18 to 70, must contribute a portion of their earnings to the plan. The plan in turn is controlled by the Canadian Human Resources and Social Development department.

If you work for an employer, contributions are shared equally. However, if you are self-employed, you will need to pay the full contribution yourself. These contributions are based solely on your income.

How does the CCP work?

It is important that you keep up contributions throughout your working life. Once you reach the age of 60 you are eligible to receive a CCP monthly income if you choose to. These will be at a lower tariff as you have opted to receive them before the recommended retirement age of 65. Another option is to contribute to the plan up until the age of 70, thus raising the monthly payments you will receive from that point onwards.

Are there any other benefits?

The CCP has two other benefits over and above the monthly income you receive on retirement.

• Disability benefits. When disability strikes, members of the plan are eligible for monthly payments for themselves and their dependents.

• Survivor benefits. In the case of the death of a member, benefits are paid to their dependents. This includes a once off payment, a monthly pension and specific benefits for children.

What if I am married?

Spouses retiring at different times may choose to divide their CPP monthly income between them. If you do choose to go this route, be aware that once the other spouse has retired, their CCP income must also be divided.

What are the implications of divorce and separation?

If you and your spouse are divorced, any contributions made to the CCP while you were married will be equally split in a process called credit splitting.

The financial wellbeing of the CCP

In the past, especially in the mid 1990’s, a time of upheaval for most funds, the CCP had come under financial strain. This was partly due to the fact that contributions were significantly lower than payments made to eligible members. Structures are in place to ensure that you receive your monthly CCP income, once activated. This includes:

• A large reserve has been built up since the 1990’s.
• A three year review system by the chief actuary of the country.
• The fund is totally independent from other government revenue systems.
• The fund has shown a large surplus in contributions over payments for a number of years.

The CCP is an excellent vehicle to help contribute to your finances when you retire. We at BHM Financial Group recommend that you incorporate it into your financial planning for your golden years!

Please note, the CCP is replaced by the Québec Pension Plan in the Québec Province. It operates in much the same way.