Mandatory and Optional CPP Contributions
Contributing to the Canada Pension Plan (CPP) is mandatory for working Canadians between the ages of 18 and 65, with contributions made by both employees and employers based on earnings. However, this requirement changes as you approach and enter retirement. All CPP contributions cease automatically at age 70, regardless of work status.
The Age-Related Timeline for CPP Contributions
Key ages impacting CPP contributions include:
- Age 18 to 64: Contributions are mandatory if you are employed in Canada (outside of Quebec) and earn above the basic exemption.
- Age 65 to 69: Contributions become optional for those working and receiving a CPP retirement pension. You can elect to stop by filing the appropriate form with the CRA.
- Age 70 and beyond: All CPP contributions stop automatically.
What is a CPP Working Beneficiary?
A "CPP working beneficiary" is someone who is working and receiving a CPP retirement pension. This status is particularly relevant for individuals aged 60-69, as it affects their ability to contribute and potentially increase their pension through the Post-Retirement Benefit.
Deciding to Stop or Continue Contributions (Age 65-69)
For those aged 65 to 69 receiving a CPP pension, the choice to continue contributing while working impacts their future retirement income. Continuing contributions leads to the Post-Retirement Benefit (PRB), a lifetime monthly increase to your CPP payments.
Continuing Contributions: The Post-Retirement Benefit (PRB)
Working and contributing between ages 60 and 69 while receiving CPP adds a PRB to your pension, starting the following year. The PRB amount is based on your contributions for that year.
Electing to Stop Contributions: The CPT30 Form
If you are between 65 and 69 and wish to stop CPP deductions, you must file Form CPT30, "Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election". A copy must also be given to your employer. The election takes effect the month after the CRA receives the form.
Key Considerations for Your CPT30 Decision
- Contributions are mandatory if you are a working CPP recipient under age 65.
- You can only make one change (stop or restart) to your election per calendar year.
- Contributions automatically stop at age 70 and this is irreversible.
- Self-employed individuals indicate their election on Schedule 8 of their tax return, not with Form CPT30.
Comparison: Continuing vs. Stopping Contributions
Consider the following when deciding whether to continue or stop CPP contributions between age 65 and 69 while working and receiving a pension:
| Feature | Continuing Contributions | Stopping Contributions |
|---|---|---|
| Primary Benefit | Increases future retirement income via the Post-Retirement Benefit (PRB). | Increases immediate take-home pay by no longer deducting CPP. |
| Contribution Period | You contribute from age 65 to 69 (up to age 70). | Your contributions effectively end at age 65. |
| Total Pension Income | A higher lifetime monthly CPP retirement pension. | Your CPP retirement pension remains unchanged from its age 65 amount. |
| Forms Required | No action is required. Contributions are automatically deducted. | File Form CPT30 with the CRA and provide a copy to your employer. |
| Reversibility | You can later elect to stop contributing by filing Form CPT30. | You can later elect to start contributing again by filing Form CPT30. |
| Long-Term Outlook | Potentially better for those with longer life expectancy who value increased lifetime income. | Better for those who prefer immediate cash flow and do not require the additional PRB income. |
The Role of Health and Longevity in Your Decision
Your health and expected lifespan should influence your decision. A longer life expectancy might favour continuing contributions to maximize lifetime PRB income. Conversely, a shorter life expectancy might make the immediate increase in take-home pay from stopping contributions more appealing. Consulting a financial advisor can help with this personal assessment.
Conclusion: Making the Right Choice for Your Retirement
While CPP contributions automatically cease at age 70, working individuals receiving a pension have the option to stop contributing between 65 and 69. Understanding the PRB and the CPT30 filing process is crucial for making an informed decision that aligns with your financial goals in retirement.
For more information, refer to the official Canada.ca page on the Canada Pension Plan Post-Retirement Benefit: https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement/eligibility.html.
How to File Form CPT30 to Stop Contributing to CPP
Steps for an Employee
- Download Form CPT30: Get the form from the CRA website.
- Complete the Form: Fill it out accurately, including your SIN and the desired effective date.
- Submit to CRA: Sign and mail the original form to the Canada Revenue Agency.
- Provide Copy to Employer: Give a signed copy to your employer for their payroll.
- Contributions Stop: Your employer will stop CPP deductions starting the first pay period after the form is processed by the CRA, effective the month after they receive it.
Steps for a Self-Employed Individual
- Self-employed individuals do not use Form CPT30.
- Indicate your election to stop contributing on Schedule 8 of your income tax and benefit return.
Considerations After Filing CPT30
- Provide a copy of Form CPT30 to all your employers if you have more than one.
- You can revoke your election to stop contributing by filing a new Form CPT30, but this is limited to once per calendar year.
