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.

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. Savings

    Tax-Saving Tips For Canadian Taxpayers

    Find out how to get a bigger return.
  2. Taxes

    Registered Retirement Savings Plans (RRSP)

    Learn how the Canadian government makes saving for your post-work years easy. We take you from your first contribution to your first withdrawal.
  3. Retirement

    How Much Should You Have In Your 401(k) To Retire?

    Determining how much money should be in your 401(k) when you retire depends on several variables, many of which are uncertain.
  4. Investing

    How To Make Sure Your Healthcare Costs Do Not Ruin Your Retirement

    The best proactive plan of action for a stable retirement is to understand medical costs, plan ahead, invest properly, and consider supplemental insurance.
  5. Investing

    3 Small Steps to Maximize Your Investing Goals

    Instead of starting the New Year with ambitious resolutions, why not taking smaller manageable steps that can have a real impact.
  6. Investing

    7 Creative Ways to Save for an Early Retirement

    Take note of these out of the box steps you can take towards securing yourself an earlier, more comfortable retirement.
  7. Your Clients

    Tips for Making Your Nest Egg Last Longer

    If you’re trying to figure out how to make your hard-earned nest egg last, there’s one piece of advice that stands above the rest.
  8. Personal Wealth & Private Banking

    What People Hate About Financial Advisors

    Advisors need to make a living too, but doing so by cutting corners at a client's expense isn't right. Here are the top complaints against advisors.
  9. Retirement

    When to Fire Your Advisor and Go Robo-Advisor

    Human financial advisor or robo-advisor: Which suits your needs best? Here are some general tips to help guide you to the right professional.
  10. Retirement

    How You Actually Get Your Pension After Retirement

    No matter what type of pension plan you have at work, decisions have to be made when you retire. Here are your options.
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 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 >>
  4. 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 >>
  5. 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 >>
  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 >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center