What Happens To Your CPP When You Pass Away?

What happens to your CPP when you pass away?

Let’s assume that both you and your spouse are receiving CPP; what would happen if one of you were to pass away?


How CPP is calculated

Before we can get into that, we must first understand how your CPP pension is calculated. The amount you receive from CPP is based on how much you contributed to the plan.

The standard age to start the CPP is 65, and to receive the maximum payout at that age, you would have needed to maximize your CPP contribution for 39 years.

The current maximum at age 65 is $1,254 per month.

However, you can start your CPP as early as age 60. Doing so would garner a penalty of 0.6% for every month the pension is taken before 65. So, if you took it on your 60th birthday, your pension would be reduced by 36%. The maximum you could then receive is $802 per month.

On the flip side, you can defer your CPP up to age 70. Doing this will result in a bonus of 0.7% every month after age 65. If you wait until age 70, you will receive a bonus of 42%, and the maximum that you can receive is $1,780 per month.


One time payout

So what would you receive if your spouse passed away?

There would be a one-time payout of $2,500, but as far as ongoing payments, that’s where things can get complicated.


Survivor benefit

Many rules will determine what you will receive, but the two primary ones are:

  1. A survivor who is over the age of 65 can receive up to 60% of their spouse’s pension
  2. The amount the survivor receives cannot increase their pension over the maximum amount they would have received at age 65, which is currently $1,254 per month.

So best case scenario, they receive up to 60% of their spouse’s CPP pension, and in the worst-case scenario, they receive nothing at all.


Let’s dive into a few examples:


Both are receiving max CPP

Spouses A and B have full CPP pensions, paying them $1,254 per month. If spouse B were to pass away, spouse A would not receive a survivor benefit. As they are already receiving the maximum amount for someone who is 65.


$1000 per month of CPP

Now let’s say that spouses A & B receive $1,000 per month from their CPP. If spouse B were to pass away, Spouse A would not be eligible for 60% of spouse B’s pension. As that would bring spouse A’s CPP over $1,254 per month. They would only receive a survivor benefit of $254, bringing them to $1,254 per month.


Average CPP payout

On average, Canadians who are 65 are currently receiving $728 per month. Canada Pension Plan – How much could you receive – Canada.ca

Let’s assume that both spouses are receiving $728 per month. If spouse B were to pass away, spouse A would be eligible to receive a survivor benefit of 60%. As that would still keep spouse A’s total CPP pension under $1,254 per month.

To clarify, spouse A is receiving $728 per month. They would be eligible for 60% of spouse B’s pension, which would be $437 per month.

In total, spouse A now receives $1,165 per month, which is under the maximum payout at age 65.


Survivor benefits are based on the age 65

It’s also important to note that the survivor benefit does not consider the age you started your CPP. If you waited until the age of 70 to start your CPP, you will not be eligible for a higher survivor amount. The survivor amount would still be toped out based on the maximum pension at age 65.

Similarly, if you start your pension at 60, you could still receive up to the maximum pension at 65.

Marc Sabourin is a Winnipeg-based Financial Advisor and Retirement Specialist with Harbourfront Wealth Management. His specialty is working with pre-retirees and retirees who are looking for retirement, investment, & tax advice. 

Disclaimer: The views expressed are those of Marc Sabourin, Certified Financial Planner, and Investment Advisor, and not necessarily those of Harbourfront Wealth Management Inc., a member of the Canadian Investor Protection Fund