Many Canadians wonder what happens to their Canada Pension Plan (CPP) payments when they or their spouse pass away. It is not always straightforward. In this post, we will walk through how the survivor benefits work and what your spouse could expect to receive.
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How CPP Payments Are Calculated
First, it helps to understand how your CPP payment is determined.
Your monthly CPP is based on how much you contributed to the plan during your working years. To receive the maximum CPP at age 65, you would need to have maximized your contributions for at least 39 years after the age of 18.
The current maximum at age 65 is $1,254 per month.
You can choose to start CPP as early as age 60, but there is a reduction of 0.6 percent for every month before age 65. If you start at 60, the maximum would be about $802 per month.
On the other hand, you can defer CPP to as late as age 70. For every month after 65 that you defer, your payment increases by 0.7 percent. If you wait until age 70, the maximum is currently $1,780 per month.
What Happens to CPP When You Pass Away?
If one spouse passes away, there is a one-time death benefit payment of $2,500.
For ongoing survivor benefits, the rules are more complex. Two main points to remember:
- The surviving spouse can receive up to 60 percent of the deceased spouse’s CPP if they are over the age of 65.
- The survivor’s combined CPP (their own pension plus the survivor benefit) cannot exceed the maximum that a person would be eligible for at age 65, which is currently $1,254 per month.
Example Scenarios
Scenario 1
Spouse A and Spouse B are both receiving the maximum CPP of $1,254 per month. If Spouse B passes away, Spouse A would not receive any survivor benefit. They are already receiving the maximum allowed.
Scenario 2
Spouse A and Spouse B are each receiving $1,000 per month. If Spouse B passes away, Spouse A would be eligible for a survivor benefit that brings their total CPP up to $1,254 per month. In this case, they would receive an additional $254 per month.
Scenario 3
Spouse A and Spouse B each receive the average CPP of $728 per month. If Spouse B passes away, Spouse A would be eligible for 60 percent of Spouse B’s CPP, bringing their total to about $1,165 per month, which is still below the maximum.
Other Important Notes
The survivor benefit does not depend on when you or your spouse started receiving CPP. Whether you started CPP early at age 60 or deferred to age 70, the survivor benefit is still based on the maximum at age 65.
Final Thoughts
CPP survivor benefits can be a helpful source of income for a surviving spouse, but the amounts are subject to limits and can vary depending on your situation.
If you would like help understanding your own CPP options and building a retirement income plan, visit our website and book an appointment with us.
