In 1966, Canadian workers began contributing for the first time to a new government sponsored retirement income plan – the Canada Pension Plan. Today, 60 years later, retirement for most Canadians bears little or no resemblance to the way retirement looked in 1966. At that time, retirement followed a predictable path – nearly all workers left a full-time position to retire completely at age 65, at which time they often started to receive monthly payments from an employer-sponsored pension plan.
Retirement has changed in at least three important ways since then. First, retirement is no longer one-size-fits-all, and retirement plans (and the age at which retirement starts) are now different for almost every individual. Second, retirement is now more often a process than an event. Rather than complete retirement from full-time employment at age 65, Canadians often gradually reduce their work commitment from full-time to part-time, while others retire from a full-time position and take up part-time work in a different field. Sometimes that part-time work is done to keep busy and maintain a sense of social connection, while in other cases it’s done out of financial necessity. Finally, while most workers in 1966 could look forward to regular payments from an employer-sponsored pension plan, that hasn’t been the reality for Canadian workers (especially private sector workers) for some time.
When retirement for most Canadians changes, retirement income systems and plans must inevitably change to meet the evolving needs of retirees – and they have. The increasingly flexible nature of retirement plans is reflected in changes made over the past fifteen years to the Canada Pension Plan.
Every Canadian worker (employed or self-employed) who earns more than a threshold amount of income during the year (that amount is currently $3,500) must contribute to the Canada Pension Plan, starting at age 18 and continuing throughout their working life, or until the month in which they turn 70. The amount of contributions made is based on the individual’s income for the year, and total contributions made will determine the amount of CPP retirement benefit for which the individual will be eligible.
It’s possible to begin receiving CPP retirement benefits as early as age 60 and as late as age 70, with the amount of benefit increasing with each month that receipt of benefits is deferred past age 60. Many Canadians now choose to begin receiving their CPP retirement benefit while continuing to participate, part-time or full-time, in the work force.
At one time, beginning to receive CPP retirement benefits meant that, even for those who chose to remain in the work force, no further CPP contributions were allowed. In 2012 that changed, with the introduction of the CPP Post-Retirement Benefit, or PRB. The availability of the PRB means that those who are aged 65 to 69 and continue to work while receiving CPP retirement benefits must decide whether or not to continue making CPP contributions. Such individuals who make the choice to continue to contribute to the Canada Pension Plan will see an increase, as the result of the PRB, in the amount of CPP retirement benefit they receive each month for the remainder of their lives.
The rules governing the availability of the PRB differ, depending on the age of the taxpayer. In a nutshell, an individual who is receiving the CPP retirement benefit and who continues to work will be subject to the following rules:
- Individuals who are 60 to 64 years of age and continue to work are required to continue making CPP contributions.
- Individuals who are 65 to 69 years of age and continue to work can choose not to make CPP contributions. To stop contributing, such an individual must fill out form https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html. A copy of that form must be given to the individual’s employer and the original sent to the Canada Revenue Agency (CRA). An individual who has more than one employer must make the same choice (to continue to contribute or to cease contributions) for all employers and must provide a copy of the CPT30 form to each employer.
A decision to stop contributing can be changed, and contributions resumed, but only one such change can be made per calendar year. To make that change, the individual must complete section D of CRA form https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html, give one copy of the form to their employer(s), and send the original to the CRA.
- Individuals who are over the age of 69 and are still working cannot contribute to the CPP.
For individuals aged 65 to 69 who are still working, a decision on whether to continue making CPP contributions is, essentially, a cost/benefit analysis – each individual must determine whether the cost of making such contributions is justified by the increase in CPP retirement benefits which will result. To make that calculation, it’s necessary to start by knowing how much continuing contributions will cost.
For 2026, the rules for contributions to the CPP are as follows.
- Each employee contributes first tier contributions of 5.95% of income between $3,500 and $74,600, to a maximum first tier CPP contribution amount of $4,230.45.
- Individuals who have employment or self-employment income of more than $74,600 will be required to pay additional CPP contribution amounts of 4% of income between $74,600 and $85,000, with the maximum second tier contribution amount (for employees) being $416.00.
- For self-employed individuals (who must pay both the employer and employee portions of CPP contributions), the maximum first tier CPP contribution in 2026 will be $8,460.90 and the maximum second tier contribution will be $832.
For individuals who are trying to decide whether to continue contributing to the CPP, there are some general rules of thumb which can be useful in making that determination. Generally speaking, continuing to contribute makes the most sense for younger individuals whose current CPP retirement pension is significantly less than the maximum allowable benefit (which, in 2026, is $1,507.65 per month), as making such contributions will mean an increase in the individual’s CPP retirement benefit each month for the rest of their life. Conversely, for individuals who are already receiving the maximum CPP retirement benefit, or even close to it, there is likely little or no benefit to be derived from continuing to contribute. Self-employed individuals will need to factor in the reality that they will be required to pay both the employer and employee contribution amounts. And, finally, those whose income is more than $74,600 in 2026 will need to consider the additional cost of making second tier CPP contributions.
It can seem that analyzing the various factors which go into a decision on whether the continue to make CPP contributions requires the skills of an actuary. There is, however, a federal government resource which is provided free of charge and enables users to obtain an estimate of the amount of PRB which they can expect to receive in each subsequent year if they continue to contribute to the CPP. That Retirement Income Calculator (which is, in fact, a useful tool for anyone engaged in planning for retirement income) can be found on the federal government website at https://srv111.services.gc.ca/generalinfo/index.
Where an individual aged 65 to 69 decides that continuing to make CPP contributions makes sense in their circumstances, and the required forms are completed and submitted, the amount of any CPP post-retirement benefit earned will automatically be calculated by the federal government (no application is required), and the individual will be advised of any increase in the monthly CPP retirement benefit each year. The PRB will be paid to that individual automatically the year after the contributions are made, effective January 1 of that second year. Since the federal government doesn’t have all of the information needed to make such calculations until T4s and T4 summaries are filed by the employer by the end of February, the first PRB payment is usually made in a lump sum amount, in the month of April. That lump sum amount represents the PRB payable from January to April. Thereafter, the PRB is paid monthly and combined with the individual’s usual CPP retirement benefit in a single payment.
More information on the PRB generally is available on the same website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement.html.