CPP Retirement Pension: What Canadians Need to Know

One reliable source of monthly income is the CPP retirement pension, a program that supports Canadians financially once they leave the workforce.

To get the most out of it, you need to understand how it works: who’s eligible, how much you might receive, and how your age affects the amount. This guide explains the key things to know so you can make confident decisions about your retirement.

What is the CPP Retirement Pension?

The CPP retirement pension comes as a monthly payment provided through the Canada Pension Plan to eligible retired Canadians. It is designed to replace part of your pre-retirement work income to help maintain your standard of living.

The CPP retirement pension is structured as an earnings-related social insurance program. Canadian workers and their employers contribute a portion of income on a paycheque basis up to a yearly maximum amount. These contributions are pooled together and invested so that they grow over time.

Then, when you retire, you qualify to get a monthly payment depending on your contributions, earnings history, and the number of years you were in the workforce.

Who is Eligible to Receive the CPP Retirement Pension?

To qualify for the CPP retirement pension, you must meet these four criteria:

• Age: You must be at least 60 years old. You can start receiving your pension the month after your 60th birthday.
• Contributions: You just have to make at least one valid contribution to the CPP. For most Canadians, this isn’t a problem since these payments are automatically taken from their paychecks.
• Minimum Years of Contribution: You must have contributed to the CPP for at least 10 years to qualify for a retirement pension. Certain exceptions apply if you have not contributed long enough, such as a CPP disability benefits.
• Work Status: You must have reduced your work income or earnings due to retirement. If you continue to have significant earnings, your pension benefits may be affected.

In addition, you must submit an application to begin receiving CPP payments; they do not start automatically just because you reach age 60. We’ll cover the application process in more detail later on.

How is the CPP Retirement Pension Amount Calculated?

The amount of Canada Pension Plan CPP retirement pension you receive is not arbitrary, but rather is calculated based on a formula that considers three key factors:

Your Lifetime Earnings

The CPP will assess how much you earned over your entire career. They compare your earnings to the Yearly Maximum Pensionable Earnings (YMPE), which is the yearly maximum amount on which you make CPP contributions. If your salary exceeds the YMPE, only the portion up to the maximum is used to calculate your pension.

Number of Contribution Years

The number of years you were making valid CPP contributions has a major impact. Generally, the more years you contributed, the higher your monthly pension.

Your Age When You Start Pension

If you take your CPP pension before age 65, the amount is reduced. If you delay pension start beyond age 65, your benefit is increased. The adjustment factor depends on your specific birthdate.

Your personal CPP retirement pension amount will be based on these key criteria. The government reviews and adjusts CPP payment amounts each year to account for new retirees, life expectancy, and cost-of-living changes. So the actual dollar figures may change annually beyond the standard criteria.

How Much CPP Retirement Pension Will I Receive?

The maximum CPP retirement pension amount is set each year by Service Canada. For example, in 2025, the maximum monthly amount a new retiree can receive starting at age 65 is $1,433.00.

However, this is the absolute maximum – your actual personal CPP pension amount will likely be lower based on your individual earnings history and years of contribution.

According to Government of Canada, the average monthly CPP retirement pension amount for new recipients as of April 2025 is $844.53. Of course, your specific amount depends on your work record.

To get a personalized estimate of your future CPP retirement pension, you can use the Government of Canada’s Retirement Pension Calculator tool online.

The Retirement Pension Calculator factors in your actual earnings history and uses the exact calculation to provide an estimate of your personal CPP retirement pension amount. This allows you to appropriately plan your retirement finances.

Source: How much you could receive – Canada.ca

When Should I Start My CPP Retirement Pension?

One decision that has a major impact on your CPP retirement pension is choosing when you take your first payment. You have some flexibility to start receiving your CPP as early as age 60 or as late as age 70.

The age at which you begin your pension affects the monthly payment amount:

Here are three scenarios where it may make sense to take your CPP retirement pension before age 65:

• You have insufficient income to cover your retirement living expenses. The early pension provides a cash flow bridge.
• You are no longer working or have minimal employment income in your early 60s.
• You are in poor health and do not expect a long lifespan in retirement.

Four reasons why you may want to delay starting your CPP retirement pension past 65:

• You are still working full-time and earning a good salary.
• You have other sufficient sources of retirement income before age 65, such as a workplace pension.
• You are in good health and expect a long lifespan (over age 85+).
• You want to maximize your CPP payments to provide a larger retirement income in later years.

The decision around when to take your CPP retirement pension requires assessing your financial situation, health, family longevity, retirement lifestyle, and other sources of retirement income.

While delaying CPP will increase your monthly payment, kicking it off earlier provides cash flow for a longer duration.

How Do I Apply for My CPP Retirement Pension?

Once you decide the timing to commence your CPP retirement pension, you will need to proactively submit an application to Service Canada. Here are seven key steps to applying for and receiving your CPP retirement pension payments:

• Step 1: Choose when you want to start: You can begin receiving CPP payments the month after turning 60. Your planned start date impacts your payment amount.
• Step 2: Review Eligibility Criteria: Confirm you meet the eligibility rules outlined earlier in terms of age, contributions, and work status.
• Step 3: Have Your Information Ready – This includes personal data, Social Insurance Number, banking details, and your spouse’s Social Insurance Number if applying for benefits for them.
• Step 4: Apply online or send a paper application: You can submit your application digitally through your My Service Canada Account online. You also have the option to submit a printed application by post.
• Step 5: Submit Supporting Documentation: This includes proof of age, marriage, and spouse’s details. You may need to mail or drop off copies of supporting documents.
• Step 6: Receive Confirmation: Service Canada will provide a confirmation of your application within 30 days, either online, by phone, or by mail.
• Step 7: Get Started with Payments: Once approved, CPP payments are issued on the 28th of each month. You determine whether you want direct deposit or cheques.

Be sure to apply in advance of when you want payments to commence so you start receiving CPP on time. If you provide incomplete information or do not submit required documents, your application processing may be delayed.

What Happens If I Work While Receiving the CPP Retirement Pension?

If you continue to work and earn income from employment or self-employment while collecting your CPP retirement pension, any CPP contributions you continue to make will increase your payments through a CPP Post-Retirement Benefit (PRB).

Here is how continuing to work affects your CPP retirement pension:

• You must still make the required CPP contributions on any employment or self-employment income you earn, no matter your age.
• These contributions will be tracked and will result in an increase to your retirement pension amount down the road through the PRB.
• Each year, your basic CPP retirement pension amount will be recalculated based on your age, earnings level, and the number of months you received payments in the previous year.
• You must inform Service Canada annually of your income earned while receiving your CPP retirement pension.

The PRB allows you to grow your CPP retirement pension further by continuing to contribute to the plan while working during your retirement years.

Is the CPP Retirement Pension Taxable?

The CPP retirement pension is considered taxable income. You must report the CPP payments you receive each year when you file your personal income tax return.

Here is what you need to know about taxes on CPP retirement pensions:

• A T4A Statement of Pension, Retirement, Annuity and Other Income is issued for your annual CPP benefits.
• The taxable portion depends on your income level but can be up to 100% of your CPP pension payments.
• CPP benefits are eligible for the Federal Pension Income Tax Credit.
• Receiving CPP retirement income may impact your eligibility for income-tested benefits.
• CPP retirement pension income could bump you into a higher tax bracket.

So, work with your accountant or tax advisor to minimize the tax impact of your CPP retirement pension and leverage available tax credits.

The bottom line

The Canada Pension Plan provides Canadian workers with a foundation for retirement income security. Apply for your CPP up to 12 months before you want payments to start so your retirement cash flow begins as soon as you finish working. With proper planning and awareness of the CPP program, you can receive the full retirement pension that you contributed to and depend on steady retirement income for your golden years.

FAQs about CPP Retirement Pension