Canada Pension Plan - CPP

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. Who is eligible for Canada Pension Plan benefits?

    Learn more about the Canada Pension Plan, who contributes to the plan and who can receive standard, disability, early retirement ... Read Answer >>
  2. How can you get your Canada Pension Plan (CPP) payments early?

    Learn about how Canadian taxpayers can receive benefits from their Canada Pension Plan before reaching normal retirement ... Read Answer >>
  3. What are the differences between Canada Pension Plans (CPP) and Social Security Benefits?

    Learn about the differences between the U.S. Social Security system and the Canada Pension Plan, and discover why one is ... Read Answer >>
  4. What are Canada Pension Plan contribution requirements and rules?

    Learn about the Canada Pension Plan contribution requirements for Canadian workers and how those contributions determine ... Read Answer >>
  5. 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 Answer >>
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    Learn about the Canada Pension Plan and how it adjusts its contributions and benefits each year for changes in inflation ... Read Answer >>
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