From Arrival to Retirement: A Newcomer’s Guide to The Canada Pension Plan

As a newcomer, it’s likely that you have worked for an employer in Canada – at least at some point during your immigration journey. If you look at your paystubs, you’ll find deductions from each paycheck going to C.P.P (the Canada Pension Plan) and E.I. (Employment Insurance). Read on to learn more about your entitlements as a Newcomer to Canada under Canada’s Pension Plan, and what that means for your retirement. 

What Is The Canada Pension Plan? 

Here’s how the federal government defines the CPP:

“The Canada Pension Plan (CPP) retirement pension is a monthly, taxable benefit that replaces part of your income when you retire. If you qualify, you’ll receive the CPP retirement pension for the rest of your life.”

Interestingly, the retirement pension is available to individuals who are still working. It’s a retirement age-based pension, and working while also receiving the pension comes with some significant benefits. 

How Does Being A Newcomer To Canada Impact My CPP Entitlement?

The CPP doesn’t pay out a set amount for every individual. The amount you will receive varies depending on a range of factors, and some of these factors are particularly relevant for newcomers to Canada. 

Generally, the amount you will receive varies depending on how much you contributed and for how long. The amount you will receive also varies depending on when you start taking the pension (more on this later). 

This means that the factors that impact your CPP entitlement include: 

• How long you lived in Canada;
• What age you stop contributing to the CPP;
• Periods of low or no earnings; and
• Divorce or separation. 

While you will need to consult the CRA’s calculators for information relating to your exact situation, these are some important things newcomers should bear in mind: 

• If you contributed to the CPP even once, you will be eligible to receive a pension. However, the amount you receive will be significantly less than those who contributed for longer. 
• Newcomers to Canada are unlikely to qualify for the maximum CPP amount due to the shortened contribution timeframe (unless they arrived as children or teens). 
• Newcomers who have worked in Canada for less than 40 years may receive less money from the Canadian Pension Plan. This is because the enhanced component of your CPP is based on your best 40 years of earnings. The calculation ‘drops out’ (doesn’t include) your 8 lowest earning years from the earnings history when determining your pension amount. Since newcomers are less likely than born-Canadians to have worked in Canada for 40 years, there is a risk that your pension amount will be reduced because your lowest earning years won’t be excluded from the calculations.

For reference, in January 2024, the maximum retirement pension at age 65 is $1,364.60 per month, but the average payment is $831.92. As outlined above, individuals who have not lived in Canada for 40 years might receive lower amounts, so the average payment for newcomers is likely lower than $831.92 and there are likely to be few if any individuals receiving the maximum entitlement of $1,364.60. 

How Can Newcomers Increase Their CPP Entitlement? 

There are a number of ways that you can maximize your CPP entitlement, including one legal method that can help you to meaningfully increase your entitlement at retirement age. 

Early Career Considerations: Focus On CPP Threshold Earnings Throughout Your Career

For those of you just starting out in your career, it’s helpful to know about the CPP thresholds. Generally speaking, if your earnings are at or above the maximum threshold for most of your career (40+ years), you will see a pension rate closer to the maximum payment. 

Importantly, Canada has recently introduced changes to how the retirement pension is funded. These changes introduce something called the CPP2, which introduces a first and secondary threshold for employee pension payments. Employees who contribute up to the maximum CPP2 threshold for most of their career could see an increase in pension payments of around 50%. 

The CPP enhancement, and CPP2 contributions, are relevant to workers who contributed to the CPP in 2019 or later. It will have the biggest impact on workers who just started in their careers around this time, while those who are nearing retirement age will see less of an impact as a result of these changes. 

Here’s a list of the threshold earnings:

All Newcomers: Apply For Child Rearing Provisions, If Relevant

Workers who took time off or worked less to look after children younger than seven may be eligible for the CPP child rearing provisions. These provisions essentially protect your pension payment amount from the impact of low earnings as a result of child rearing years. 

It does this by basically ignoring the low earnings for the calculation of the base component of your CPP benefit IF the low earnings would otherwise reduce your CPP earnings. 

It also provides you a credit for the calculation of the enhanced component of your CPP benefit, for those with earnings from 2019 onwards. This credit adds to your earnings for those years, to a specified limit, to reflect the contribution you would have made if you did not take time off to care for your young children. The credit is based on your contribution to the CPP in the five years before you became the primary caregiver. 

Note that you need to apply for child-rearing provisions when you apply for your CPP benefit. You can find more information about the application process.

Late Stage Career Boost: Continue Working While Receiving The CPP

An interesting quirk of the CPP retirement pension is that you can continue working while you receive the pension, and this work won’t reduce the pension amount. In fact, working while also receiving your CPP pension can actually boost your future CPP payments, so long as you are under age 70 while you work. 

If you are between the ages of 60 and 70 and you have opted to receive the CPP and continue working and making CPP contributions, these contributions will increase your future CPP benefits. The benefit amount is typically small in the first few years, but increases over time with continued contributions. You’ll receive the higher amount for the rest of your life. 

Late Stage Career Boost: Consider Delaying Your CPP

If you wait until you are older (70 years old) to receive your retirement pension, you will be eligible for a higher payment. 

Here’s how it works:

Your age affects your pension amount:

• If you start before age 65, payments will decrease by 0.6% each month (or by 7.2% per year), up to a maximum reduction of 36% if you start at age 60
• If you start after age 65, payments will increase by 0.7% each month (or by 8.4% per year), up to a maximum increase of 42% if you start at age 70 (or after).

So, should you wait to apply for your CPP? 

This depends on a range of factors including your health, your unique financial situation, and how much longer you plan to work for. But, delaying the CPP to age 70 can result in a significant increase in your total earnings from the retirement pension. 

Here’s one example of what it might look like (again, your exact CPP payment will look different based on your contributions to the CPP): 

We got these figures from financialcalculators.net/wealthsmart/cpp-take-early

As you can see, this individual only needs to live to 78 to receive a lifetime total CPP payment that’s higher than if they started at 60 years old. In other words, it’s only eight years until that person ‘breaks even’ from their decision. 

If this person lives to be 90, they will have received over $90,000 more from the CPP in their lifetime by delaying their CPP payments to 70 years of age instead of taking it at 60.

This can be a helpful tool for those who are close to retirement age and looking to increase their CPP entitlements. But again, we suggest working with a financial advisor and/or conducting your own research based on your own unique circumstances to decide what’s best for you. 

Canada’s Social Security Agreements

Finally, newcomers to Canada from certain countries may benefit from an international social security agreement. These agreements help manage how pensions and retirement benefits are managed across borders, which can be beneficial for newcomers who have lived or worked in more than one country. 

They typically benefit individuals who have lived or worked in these countries by avoiding double contributions and/or allowing the totalization of periods of contributions in both countries, so that you can qualify for benefits based on time spent living and working elsewhere. 

As of May 2024, the countries that have signed a social security agreement with Canada include: 

Albania

Antigua and Barbuda 

Austria

Barbados

Belgium

Brazil

Bulgaria

Chile

China

Croatia

Cypress 

Czech Republic

Denmark

Dominica

Estonia

Finland

France

Germany

Greece 

Grenada

Guernsey

Hungary

Iceland

India

Ireland

Israel

Italy

Jamaica

Japan

Jersey

Korea (South)

Latvia

Lithuania

Luxembourg

Malta

Mexico

Morocco

Netherlands

North Macedonia

Norway

Peru

Philippines

Poland

Romania

St Kitts and Nevis 

Saint Lucia

Saint Vincent and the Grenadines

Serbia

Slovakia

Slovenia

Spain

Sweden

Switzerland

Trinidad and Tobago

Turkiye

United Kingdom

United States 

Uruguay

Find the most recent list here. 

Summary: CPP Payments for Newcomers

Most individuals who have immigrated to Canada will be eligible for CPP, so long as they have made at least one CPP contribution during their time in Canada. However, newcomers are less likely to be entitled to the maximum retirement benefit than their Canadian-born counterparts unless they started working in Canada in their early adulthood. 

As a result, newcomers need to be aware of the factors that may impact their CPP entitlements, such as child-rearing provisions and delaying receipt of the benefit. They should also consider consulting with a financial planner to ensure that they apply for the CPP at a time that makes sense given their circumstances.