Whether you’re just starting your career, approaching retirement, or somewhere in between, it’s important to understand how the Canada Pension Plan (CPP) works. This national program helps ensure that Canadians have a reliable source of income in retirement and in other life situations where earnings stop, like disability or death.
Let’s break it down in a simple, clear way.
What Is the Canada Pension Plan (CPP)?
The Canada Pension Plan (CPP) is a social insurance program run by the federal government of Canada. Its main goal is to provide a basic income in retirement, but it also offers other types of financial support:
- Retirement pensions
- Disability benefits
- Survivor benefits for families
- A one-time death benefit
The CPP is funded by workers and employers through automatic deductions from your paycheck. Over your working life, you contribute to the plan, and when you need it, you receive regular payments.
Who Has to Pay Into the CPP?
You must contribute to CPP if:
- You are 18 years or older
- You are employed or self-employed
- You earn more than $3,500 per year
- You live and work in any province or territory except Québec (Québec has its own plan called the Quebec Pension Plan, or QPP)
Who Doesn’t Pay?
You don’t have to contribute to CPP if:
- You are under 18 or over 70
- You are already receiving a CPP retirement pension and choose not to contribute
- You are earning less than $3,500 annually
How Much Do You Pay Into CPP?
CPP contributions are calculated as a percentage of your income, between a minimum and a maximum amount. Here’s how it works in 2025:
- You contribute 5.95% of your annual income above $3,500
- Your employer matches your contribution
- If you’re self-employed, you pay both shares: 11.9% in total
Contribution Example:
If you earn $60,000 in 2025:
- Subtract $3,500 (the basic exemption) = $56,500
- 5.95% of $56,500 = about $3,361.75 from you
- Your employer also pays $3,361.75
So, a total of $6,723.50 goes into your CPP account that year.
There is also an upper limit, known as the Year’s Maximum Pensionable Earnings (YMPE). In 2025, the YMPE is about $68,500. You don’t pay CPP on earnings above that.
What Do You Get from the CPP?
1. CPP Retirement Pension
The main benefit is the retirement pension. This provides monthly income for life once you start receiving it.
- You can start as early as age 60, but your monthly amount will be reduced.
- The standard starting age is 65.
- You can delay until age 70, which increases your payments.
How Much Can You Get?
As of 2025, the maximum monthly CPP retirement pension at age 65 is about $1,364, but most people receive less than the maximum, because the amount depends on:
- How long you worked
- How much you earned
- How much you contributed
The average CPP retirement pension in 2025 is around $758 per month.
2. CPP Disability Benefits
If you’re under 65 and can no longer work due to a severe and prolonged disability, you may qualify for monthly CPP disability payments. These benefits are higher than retirement pensions and are designed to help you manage your basic living expenses.
3. CPP Survivor’s Pension
If you pass away, your spouse or common-law partner may be eligible to receive a survivor’s pension. The amount depends on your contributions and their age.
4. CPP Death Benefit
This is a one-time lump-sum payment (up to $2,500) paid to your estate to help cover funeral or final expenses.
How to Apply for CPP Benefits
CPP benefits don’t start automatically — you must apply. Here’s how:
Retirement Pension:
- Apply online through your My Service Canada Account
- Or download and mail a paper application
- It’s recommended to apply 6 months before you want payments to begin.
Disability or Survivor Benefits:
- Forms and medical documents may be required
- Check Service Canada for exact application steps
You can also stop and restart your CPP pension, though rules and limitations apply.
Can You Work While Receiving CPP?
Yes! You can still work while receiving your CPP pension. If you’re under 70 and working while receiving CPP, you can continue contributing through the Post-Retirement Benefit (PRB). These extra contributions increase your future CPP payments, even after retirement.
CPP vs. Other Retirement Income
The CPP is just one part of retirement income. Most Canadians also rely on:
- Old Age Security (OAS) – another federal program that pays monthly income to seniors starting at age 65
- Guaranteed Income Supplement (GIS) – for low-income seniors
- Personal savings – RRSPs, TFSAs, company pensions, and other investments
Together, these sources are often referred to as the “three pillars” of retirement income in Canada:
CPP + OAS + Personal savings
Why Is the CPP Important?
The CPP is a critical piece of Canada’s social safety net. It:
- Helps prevent poverty in old age
- Provides stable, reliable monthly payments
- Offers peace of mind if you’re disabled or your loved one passes away
The CPP is also sustainable and professionally managed. It’s overseen by the Canada Pension Plan Investment Board (CPPIB), which manages over $500 billion in assets to ensure the program remains strong for future generations.
Final Thoughts
The Canada Pension Plan is a key part of life in Canada. By understanding how it works and planning ahead, you can make smart choices about your retirement and financial future.
Whether you’re 25 or 65, it’s worth taking a few minutes to check your CPP contributions and estimate your future benefits. You can do this through your My Service Canada Account online.
