Canada Pension Plan has changed quite a bit. The changes were announced a couple of years ago, but now that it’s here, the details are starting to emerge.

If you are 70+ and already receiving your CPP, you are not affected, but read for your own pleasure and share with those that are younger than you!

If you are 60 to 70, receiving your CPP and no longer working, reading this is also optional as there is no affect on you.

If you are 65 to 70 and still working and receiving CPP, you need to pay attention! If you do not want to contribute to CPP, you need to advise your employer that you want to opt out.

You’ll need to complete form CPT30 – Election to Stop Contributing to the Canada Pension Plan; give a copy to your employer, keep a copy for yourself and send the original to Canada Revenue Agency. If you do not file with your employer, they will be required to deduct CPP from your pay until you give them the form. If you cannot get this form from CRA’s website, give me a call or drop by.

You do of course have the option of contributing to CPP while you are working and between 65 and 70. More info below… keep reading!

If you are 60 to 65 and still working, starting January 2012, your employer will need to start deducting CPP from your pay again. And will do so until you turn 65. Then you’ll need to “opt out” (see above).

For the self employed, if you are 60 to 65, you will need to contribute to CPP. As self employed, we contribute twice the amount: the employee’s portion and the employer’s portion. If you are self employed and between 65 and 70, you can opt out of paying; likely the best choice.

The good news in all of this is if you are receiving CPP and are required to or want to contribute to CPP, the contributions will increase your CPP the following year and for life.

So if you are 65 to 70, receiving CPP and still working, should you contribute to CPP?? Generally if you plan to live past 77 or so, you will “win” (get more than you put in). However, do you want more money now or in the future??

Another major change is once you turn 60, you can begin to receive your CPP anytime and you do not have to be “retired” or lower your employment income. CPP calls it “removal of the Work Cessation Test”. Before 2012, in order to qualify to collect the CPP retirement pension before age 65, a person must have reduced earnings for the month prior to collecting the pension, and the following month. Now no reduction in earnings will have to take place in order to collect the benefits prior to age 65.

The other major changes to CPP have to do with the reduced CPP from 60 to 65 and the increased CPP from 65 to 70.

Starting in 2012, the percentage amounts used to reduce or increase the early or late taken pensions will be gradually increased.

The early pension reduction will gradually be increased to 0.6% per month for each month that the pension is taken before age 65. This would be done over a period of five years. At 2017, the pension will be reduced by 36% for a person who begins collecting it at age 60. It has been only 30% up to now. So in 2012, it will be a reduction of 31% and in 2013 it will be 32%, etc.

The late pension addition would be gradually increased to 0.7% per month for each month that the pension is started after the 65th birthday, up to age 70. This will be done over three years, and it started in 2011. So by 2014, someone starting their CPP at age 70 will have it increased by 42%!

As you can see, CPP is encouraging retirees to begin their CPP later by penalizing the early ones (60 to 65) and rewarding the later ones (65 to 70).

So should you start your CPP early? It’s a different answer for everyone. Keep in mind that CPP has other benefits. The ability to collect CPP disability stops when you start receiving it (or age 65 whichever is earlier). So if you still want that option while you are working, it may be better to keep contributing and not collecting CPP.

The times, they are a changing. I think that would make a good song!

All the best to you and your family for 2012. Hope we are still around after next December 21, 2012. I hope our interpretation of the Mayan calendar is wrong. I still have too much work to be done!

Anni Markmann is a financial advisor and tax professional working, living, and volunteering in our community. Contact her at 422-6631 or or the new location at 36 Dawson Road in Ste Anne