Canada Pension Plan - CPP

AAA

DEFINITION of 'Canada Pension Plan - CPP'

One of three levels of Canada's retirement income system, which is responsible for paying retirement or disability benefits. The Canada Pension Plan was established in 1966 to provide a basic benefits package for retirees and disabled contributors. If the recipient dies, survivors receive the plan's provided benefits.

The CPP pays a monthly amount, which is designed to replace about 25% of the contributor's earnings on which initial contributions were based, and is indexed to the Consumer Price Index.

INVESTOPEDIA EXPLAINS 'Canada Pension Plan - CPP'

There are several rules governing the amount an individual will receive upon retirement or disability. This amount is based on the person's age and how much he or she contributed to CPP while working. CPP benefits are considered taxable income. This is why some households elect to share the income, which can reduce taxes.

CPP is roughly equivalent to the U.S. Social Security program. People residing in Quebec contribute to and receive the Quebec Pension Plan (QPP), not the CPP.

RELATED TERMS
  1. Pension Adjustment Reversal - PAR

    A numerical calculation in certain Canadian pension plans that ...
  2. Year's Maximum Pensionable Earnings ...

    A figure set each year by the Canadian government determining ...
  3. Purchased Service

    The additional amount of service years that Canadian pensioners ...
  4. Pensionable Service

    The period of service, expressed in a yearly figure, for which ...
  5. Form 8891

    An IRS form that must be completed by any U.S. citizen or resident ...
  6. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
Related Articles
  1. How are payments calculated on a Canadian ...
    Retirement

    How are payments calculated on a Canadian ...

  2. Is a Locked-in Retirement Account (LIRA) ...
    Retirement

    Is a Locked-in Retirement Account (LIRA) ...

  3. How can you get your Canada Pension ...
    Retirement

    How can you get your Canada Pension ...

  4. What are Canada Pension Plan contribution ...
    Retirement

    What are Canada Pension Plan contribution ...

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center