Canada Pension Plan Disability Benefits
General information about the CPP
What benefits does the Canada Pension Plan provide?
There are three kinds of Canada Pension Plan benefits:
- disability benefits (for disabled contributors and their dependent children);
- a retirement pension;
- survivor benefits (the death benefit, the survivor's pension and the children's benefit).
The CPP operates throughout Canada. The province of Quebec administers its own program, the Quebec Pension Plan (QPP), for workers in Quebec. The two plans work together to ensure that all contributors are protected no matter where they live.
How is the Canada Pension Plan financed?
The CPP is a "contributory" plan. This means that all its costs are covered by the financial contributions paid by employees, employers and self-employed workers, and from revenue earned on CPP investments. The CPP is not funded through general tax revenues.
CPP funds are invested by the CPP Investment Board, an autonomous body whose mandate is to achieve a maximum rate of return on investment without undue risk. Operating independently of the federal and provincial governments, the Board's qualified professionals invest CPP funds in financial markets, broadly following the same investment rules as other pension plans. The Board is overseen by a board of directors.
The Board is accountable to the public and regularly reports its investment results. Visit www.cppib.ca for details.
Who pays into the CPP?
With very few exceptions, every person in Canada over 18 who earns more than the basic exempted amount ($3,500 per year) must pay into the CPP (or the QPP in Quebec). You and your employer each pay half the contributions. If you are self-employed, you pay both portions. You should pay into the CPP both to build up your future retirement pension and to provide basic long-term disability insurance coverage.
How much do I pay into the CPP?
The amount you pay is based on your employment earnings. If you are self-employed, it is based on your net business income (after expenses). You do not contribute on any other type of income, such as investment income. If, during a year, you contributed too much or earned less than a set minimum amount, your excess contributions will be calculated when you file your income tax return.
You pay contributions only on your annual earnings between the minimum and a maximum level (these are called "pensionable" earnings).
The minimum level is frozen at $3,500. The maximum level is adjusted each January, based on increases in the average wage. In 2005, the maximum level is $41,100.
Contributions on employment income
Why are my contributions important?
The CPP uses your contributions to determine whether you or your family are eligible for benefits and, if so, the amount. Both how long and how much you contribute (up to the maximum each year) are factors.
Normally, the more you earn and contribute to the CPP over the years, the higher your benefit will be (when you become entitled).
Your CPP credits can also be affected by "credit splitting".
What is my "contributory period" and how is it used?
The time when you can contribute to the CPP is called your "contributory period". It is used in calculating the amount of any CPP benefit to which you are entitled. You do not contribute while you are receiving CPP disability benefits. Removing that time from your contributory period protects the calculation of your future benefits (see next question).
The CPP contributory period starts when you are 18 years of age (or January 1, 1966, whichever is later) and ends when you start getting your CPP retirement pension, die, or turn 70.
If I had some low-earning years, will that reduce my pension?
CPP calculations include both how much and for how long you contributed. To keep your pension as high as possible, the CPP drops out some parts of your contributory period from the calculation:
- periods when you stop working or your earnings are lower while you raise your children under the age of seven;
- months after the age of 65 (which can be used to replace any low-earning months before 65);
- any month when you were eligible for CPP disability benefits;
- the 15 percent of your contributory period in which your earnings were lowest.
How does the CPP keep track of my contributions?
Since its implementation in 1966, the CPP has kept a record for each person who pays into the Plan, and for people who pay into both the CPP and the QPP. The information is supplied through the Canada Revenue Agency and Revenu Québec.
Your CPP record is called a Statement of Contributions. This document shows the total amount of your CPP contributions by year and indicates the "pensionable earnings" on which they are based. It also provides an estimate of what your pension or other benefits would be if you were eligible to receive them now.
It is important that you check your T4 slip (the statement of earnings you receive from your employer each year) to make sure your name and social insurance number (SIN) are the same as they are on your SIN card. If they are not, your CPP contributions may not be credited to your CPP record. This could mean not getting benefits to which you are entitled.
If you change your name or lose your social insurance card, you should call 1 800 206-7218 as soon as possible to make the change or get a new card.
Your Statement of Contributions has been available for some time by mail, but now it is even easier to get a copy. You can still ask us to send it to you by mail (once in any 12-month period) or, as a contributor to the Canada Pension Plan (CPP), you can now view your Statement online anytime. To use this new secure service, you'll need to get your own Personal Access Code. You can apply for a Personal Access Code online by going to www.sdc.gc.ca and selecting "E-Services" from the menu bar on the left.
Check your statement carefully - particularly your earnings and contributions. You should compare these amounts to any previous T4 (income tax) slips. If you disagree with any of the figures, contact us immediately. A discrepancy could affect your eligibility or the amount of any future CPP benefits.
What is a "spouse" or "common-law partner"?
A "spouse" is a person to whom you are legally married. The CPP defines a "common-law partner" as a person who has lived in a conjugal relationship with a partner of either sex for at least one year.
What are CPP "pension credits"?
The CPP records your contributions over the years as "pension credits". Generally, the more credits you have, the higher your CPP benefits will be.
What is "credit splitting"?
When a marriage or common-law relationship ends, the CPP credits built up by a couple while they lived together can be divided equally between them. These credits can be split even if one spouse or common-law partner did not pay into the CPP.
Credit splitting can affect the CPP entitlements of both former spouses or common-law partners. For more information, contact us and ask for the CPP fact sheet, Credit Splitting Upon Divorce or Separation or visit the publications section of our website.
What is pension sharing?
Spouses or common-law partners who are together (not separated or divorced), who are both at least 60 years of age and who receive CPP retirement pensions can share the pension benefits earned during their time together. This may result in tax savings. If only one is a CPP contributor, they share that one pension. The overall benefits paid do not increase or decrease with pension sharing. You must apply to share your pension.
For more information on pension sharing, contact us and ask for the fact sheet Sharing your pension for possible tax savings or visit the publications section of our website.
What happens if I pay into the Quebec Pension Plan (QPP)?
Which plan you pay into (CPP or QPP) depends on where you work, not where you live. If you work in Quebec, you pay into the QPP. If you work in any other province or territory, you pay into the CPP. Depending on where you work over the years, you may pay into both plans.
The two plans provide similar benefits. If you pay into only one of the plans, you apply to that plan for your pension or benefits.
If you have contributed to both the CPP and QPP, you apply to the QPP if you live in Quebec when applying for benefits and to the CPP if you live elsewhere in Canada when you apply.
If you live outside Canada, you apply according to the last province in which you lived before you left the country.
Regardless of which plan pays your benefit, the amount is calculated according to your contributions to both plans and the legislation of the plan responsible for paying you.
What if I lived or worked in another country?
Canada has international social security agreements with many countries. These agreements can help you get pensions or benefits from either country or from both. If you did not live or work long enough in another country to qualify under its rules, the time you spent there may be added to your time in Canada to help you meet eligibility requirements.
If you have lived or worked in another country, you should contact Us for more information.
Can my payments be deposited directly to my bank account?
Yes. You can obtain direct deposit forms from us, as well as from many banks, caisses populaires, credit unions and trust companies. If your payment comes by cheque, it usually arrives during the last three banking days of each month. If you have direct deposit, the money will be deposited in your account on the third-last banking day of each month.
Visit www.sdc.gc.ca and select "E-services" to find out how to view your personal information and make changes to it online if you change your name or your banking information.
Can I receive CPP payments outside Canada?
Yes, provided you meet all CPP eligibility conditions, payments are made anywhere in the world.
Do I get cost-of-living increases?
Yes. Your CPP payments are indexed to the cost of living. Payments are adjusted in January, if necessary. Payments will not decrease if the cost of living goes down.
What if I am incapable of applying?
If you are incapable of applying for a CPP pension or benefit because of an illness or infirmity, a representative can apply on your behalf.