Canada Pension Plan - CPP

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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.

BREAKING DOWN '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.

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RELATED FAQS
  1. Is a Locked-in Retirement Account (LIRA) protected from creditors?

    As of 2014, Locked-in Retirement Accounts are protected from creditors. The only exceptions are judicial orders for spousal ... Read Full Answer >>
  2. How are payments calculated on a Canadian Pension Plan (CPP)?

    If you are looking to calculate how much you are going to receive from your Canada Pension Plan, or CPP, benefits, the best ... Read Full Answer >>
  3. What are the steps to applying for a Canada Pension Plan (CPP)?

    To apply for the Canada Pension Plan, complete the application online, or print it out and mail it to Service Canada. If ... Read Full Answer >>
  4. What are Canada Pension Plan contribution requirements and rules?

    The Canada Pension Plan, or CPP, has very similar contribution rules to those of Social Security in the United States. Every ... Read Full Answer >>
  5. How can you get your Canada Pension Plan (CPP) payments early?

    The Canada Pension Plan is one of the two major publicly provided retirement programs available to Canadian citizens, along ... Read Full Answer >>
  6. When should I take my Canadian Pension Plan distributions?

    The Canadian Pension Plan (CPP) is a retirement program from which contributing Canadians may receive payments at the age ... Read Full Answer >>

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