The Canada Pension Plan is a retirement plan that all working Canadians must pay into. It’s similar to Social Security in the U.S.
Right now roughly 5% of my gross salary up to ~$50K goes to pay for my CPP premium, and my employer matches this amount. If I work all the way to 65 years old and retire then I would receive about $12,000 a year of CPP benefits in today’s dollars because the payout is indexed to inflation. CPP benefits are not income tested, so how much income I make in retirement from other sources does not affect my CPP payments 🙂 This is different than Old Age Security (OAS)
With an aging population in Canada, many are concerned about poverty in the senior community. A few provinces are starting to talk about expanding the CPP. They want current workers to pay more into the CPP system so when they retire they will receive more benefits. I think a lot of Canadians can benefit by increasing their pension plan. But I’m not sure expanding the CPP is the right way to do it.
For example, if I want to retire at age 45 then I have to wait another 15 years before I can apply for CPP benefits. The earliest someone can receive CPP payments is at age 60 so it’s not up to the individual when they want to retire. The other issue is since employers have to match their worker’s contributions, higher CPP premiums will mean a higher payroll tax for businesses.
Perhaps the best solution is a voluntary government pension system on top of the current system without increasing CPP. I suppose we shall see what happens in time.