Are you planning retirement for your clients?

Start with planning when Canada Pension Plan (CPP) and Old Age Security (OAS) pension benefits should be taken.  Here are some recent changes to take into account:

Canada Pension Plan

Taxpayers may opt to begin receiving their CPP retirement pension as early as age 60, albeit with a significant reduction in the value of their pension.  For each month between the start date of the pension and the taxpayer’s 65th birthday, the pension is reduced by 0.58% (for 2015, 0.6% for 2016).  For those who start on their 60th birthday in 2015, the reduction is 34.8%.

If they continue to work though, they will still have to continue to contribute on their CPP insurable earnings until they reach age 70 or opt out of contributing.  Those contributions made after the pension starts will generate an additional pension benefit called a post-retirement benefit.  For those who earn the maximum CPP insurable earnings ($53,600 for 2015), their $2,500 premiums will purchase an additional $27/month pension.  Contributions must continue at least to age 65.  As of the month the taxpayer turns 65, he may opt out of further contributions by filing Form CPT30 with his employer’s payroll department.

For those who don’t need their CPP income until later, an increased pension may be garnered by delaying the start date beyond age 65.  The pension amount is increased by 0.7% per month of deferral for a maximum increase of 42%.

Whether the CPP pension is received early or late, it must be applied for.  Application should be made to Service Canada either through their online application form or on paper using form SC ISP-1000.  It is recommended that the application be submitted six months prior to the desired pension start date.

NEXT WEEK:  How To Make The Decision About OAS Benefits