When planning for retirement, you’ll want to factor in how much you should receive from Canada’s public pensions. The Canada Pension Plan (CPP) pays out a monthly, taxable benefit to all eligible Canadians and acts as a source of income during retirement. However, it’s important to view CPP as only one part of your overall income, not a replacement for your current income.


When you look at how much CPP you will get, it probably won’t be enough to cover more than a few monthly expenses. In 2020, the average CPP was $689.17 per month.

Let’s explore how the Canada Pension Plan works, so you can get an idea of what you can expect to receive. Once you know the amount, you can figure out how to factor CPP into your overall retirement savings plan.



How does CPP work?


The Canada Pension Plan has been around since 1965. It was created as a response to growing poverty among retired Canadians and, at the time, was intended to replace 25 percent of a worker’s average lifetime earnings.

CPP is funded from payroll contributions, which are deducted from your paycheque. Both you and your employer contribute the same amount. If you’re self-employed, you pay the full rate.

When you reach retirement age, you’ll need to apply for your pension in order to start receiving it. While the standard retirement age is 65, you can start receiving your CPP payout as early as age 60, or you can wait up until age 70.

What factors determine how much CPP I will get?


How much you can expect to receive depends on a few factors:

  • How much you pay into the pension during your working life, which depends on what you earn

  • When you start receiving the pension—if you start receiving it at 60, your monthly payout will be less than if you wait until you turn 65, even less if you wait until age 70.

  • How many years you contributed, in total.


Where does CPP fit into your retirement savings plan?


The maximum CPP payout for new beneficiaries in 2021 is $1,203.75 per month. Even if you are eligible for the highest possible payout, this won’t be enough to cover your living expenses.

Think of CPP as a fraction of your overall retirement savings pie. You’ll also have other sources of retirement income, which depend on your income bracket, whether your employer offered a workplace pension plan, and how much you save for retirement.

The one factor you have the most control over is your investment income. We can help you create a tailored investment strategy to help you meet your retirement goals. 


Contact us today to set up a time to chat about your future.


© Bellwether Investment Management Inc. 2024. This communication is intended for residents of the provinces in which we are registered and is not meant to be a solicitation to any persons not resident in those provinces. Any opinions expressed in this article are just that, and are not guarantees of any future performance or returns. Some of the information contained in this article has been drawn from sources believed to be reliable but due to the fact that it is provided by a third party, it cannot be guaranteed to be accurate or complete. Bellwether Investment Management Inc., Bellwether Estate and Insurance Services Inc. and Bellwether Family Wealth cannot provide tax advice and therefore we recommend that you consult your tax advisor for further assistance with your tax planning and the preparation of your tax return. The report is prepared for general informational purposes only and the securities mentioned in this report should not be construed as a recommendation for any specific securities.

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