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I can confirm that the Estate can indeed apply for OAS for someone that hadn't applied prior to their death. The Estate must apply within one year of death, and the application will be deemed to have been received on the date of death, thus the 11 month retroactive period would be from the date of death not necessarily the actual date of the application.

I know nothing about how this retroactive amount is reported or taxed.
Thanks Dogger. Expert info as always.
 

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CPP increase for 2022 is only 2.7% with inflation at 4.7% Why is the calculation not like OAS which tracks CPI in the current year?
Because CPP payments are not based on the current year but the average of the last 5 years. So although inflation in the last year was quite high the change of the 5 year moving averages of YMPE was considerably less.
 

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Discussion Starter · #785 ·
Because CPP payments are not based on the current year but the average of the last 5 years. So although inflation in the last year was quite high the change of the 5 year moving averages of YMPE was considerably less.
That's not quite the answer that Martik was looking, and it's actually false. The 5-year average actually increased by a little over 3.3% from $57,780 in 2021 to $59,700 in 2022. That YMPE average only affects benefits starting in 2022 though, whereas benefits in pay in 2021 are indexed according to CPI increases, as is OAS. The difference though is that OAS is indexed four times each year whereas CPP is only indexed once each January. And the indexing is based on the 12-month average CPI ending with Oct 2021 compared to the same average ending with 2020.
 

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That's not quite the answer that Martik was looking, and it's actually false. The 5-year average actually increased by a little over 3.3% from $57,780 in 2021 to $59,700 in 2022. That YMPE average only affects benefits starting in 2022 though, whereas benefits in pay in 2021 are indexed according to CPI increases, as is OAS. The difference though is that OAS is indexed four times each year whereas CPP is only indexed once each January. And the indexing is based on the 12-month average CPI ending with Oct 2021 compared to the same average ending with 2020.
OK. Good to know.

So from what you are saying, they take the annual inflation increase for each month in 2021, when compared to the corresponding month in 2020, and then average those 12 numbers to come up with a 2.7% increase for CPP for the following year.

Is that how it works when one is collecting CPP?
 

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Discussion Starter · #787 ·
OK. Good to know.

So from what you are saying, they take the annual inflation increase for each month in 2021, when compared to the corresponding month in 2020, and then average those 12 numbers to come up with a 2.7% increase for CPP for the following year.

Is that how it works when one is collecting CPP?
Not exactly. They don't do any type of month-to-month comparison. They average the CPI value for the 12-month period of Nov 2020 thru Oct 2021 and divide that average by the average CPI value for the 12-month period of Nov 2019 thru Oct 2020 to come up with the 2.7%. Here's a link with the formula:

And Yes, that's the way that CPP benefits are indexed after they are in pay. Before they go into pay, the earnings are indexed based on wage increases as measured by the YMPE. After they go into pay, the benefit amounts are indexed based on price increases as measured by the CPI.
 

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Thanks for the explanation.

Looking closer at that formula it would appear to me that the lost 2.0% that martik was concerned about would get added to the increase a pensioner will get next year, even if inflation is zero over 2022. The discrepancy he is alluding to seems to be coming from him using an inflation rate for all of 2021 (Jan to Dec), but CPP really using CPI from approximately June 2020 to May 2021, when one considers that CPP is averaging the two respective years and not going from January to December.
 

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Discussion Starter · #789 ·
Thanks for the explanation.

Looking closer at that formula it would appear to me that the lost 2.0% that martik was concerned about would get added to the increase a pensioner will get next year, even if inflation is zero over 2022. The discrepancy he is alluding to seems to be coming from him using an inflation rate for all of 2021 (Jan to Dec), but CPP really using CPI from approximately June 2020 to May 2021, when one considers that CPP is averaging the two respective years and not going from January to December.
That's a good observation and conclusion.
 

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With the YMPE increasing with the enhanced CPP, how are corporate and/or public pension payout calculations going to be impacted?

My pension is 1% up to YMPE and 1.6% above YMPE. Am I going to still be entitled to this based on the old YMPE system? They've been taking a P.A. based on the old YMPE, afterall.. My early pension doesn't start for 20 more years, unreduced 25 years. Nobody is even going to remember there was an old, unenhanced pension by then!
 

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Discussion Starter · #791 ·
With the YMPE increasing with the enhanced CPP, how are corporate and/or public pension payout calculations going to be impacted?

My pension is 1% up to YMPE and 1.6% above YMPE. Am I going to still be entitled to this based on the old YMPE system? They've been taking a P.A. based on the old YMPE, afterall.. My early pension doesn't start for 20 more years, unreduced 25 years. Nobody is even going to remember there was an old, unenhanced pension by then!
The YMPE isn't increasing under the enhanced CPP. What they're doing is creating a new ceiling above the YMPE known as the YAMPE (Year's Additional Maximum Pensionable Earnings), so I don't see that there will be any impact on any other pensions.
 

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@Dogger1953 If I may ask a question please.

I'm coming up on age 58, with a plan to draw CPP retirement income at age 62.5. As a small biz owner, I've drawn salary way above YMPE since age 26. Due to changing circumstances, I have the option to collect Dividends exclusively (No further CPP contributions) or go to a mix of salary/div comp.model. How much am i giving up in CPP benefits, if I elect to draw dividends exclusively until retirement? I'd love to save the EE and ER CPP contributions going forward.
I appreciate you lending your expertise here.
 

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Discussion Starter · #794 ·
Hi Dufresne - It would cost you $90 if you want an exact calculation, but my best guess is that your CPP retirement pension will be about $100 less at age 62.5 if you don't make any further CPP contributions. That guess is probably accurate within about +/- $50.
 

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Hi Dogger, I am asking this question on behalf of my parents. My father is turning 71 at the end of the summer while my mom will turn 59. My father contributed to at least 30 years to his CPP while my mom has contributed around 10 years. Since the beginning of the pandemic, she is currently not working.

When he turns 71, he will retire, receive his employer’s pension and continue working part-time. After his death, his employer’s pension will be transferred to my mother. My father will start requesting his CPP as he just realized he is eligible for it. However, what do you suggest my mom does? The money is currently not needed, our focus is to make sure she will be taken care of when he passes away.

1)Should she wait until the age of 70, or should she start claiming at 60 because she wont be working between 60-70?

2) Should they do pension sharing? What is the benefit?

3) Did I forget something that we should take into account?

Much appreciated.
 

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Discussion Starter · #796 ·
Hi Dogger, I am asking this question on behalf of my parents. My father is turning 71 at the end of the summer while my mom will turn 59. My father contributed to at least 30 years to his CPP while my mom has contributed around 10 years. Since the beginning of the pandemic, she is currently not working.

When he turns 71, he will retire, receive his employer’s pension and continue working part-time. After his death, his employer’s pension will be transferred to my mother. My father will start requesting his CPP as he just realized he is eligible for it. However, what do you suggest my mom does? The money is currently not needed, our focus is to make sure she will be taken care of when he passes away.

1)Should she wait until the age of 70, or should she start claiming at 60 because she wont be working between 60-70?

2) Should they do pension sharing? What is the benefit?

3) Did I forget something that we should take into account?

Much appreciated.
1) The fact that she's not going to be working between age 60 and 65 is definitely a factor that favours taking it at age 60, but it's not the only factor and shouldn't by itself be enough of a reason. Not working between age 65 and 70 doesn't mean much, because her "calculated CPP won't decrease any more during those years.

2) They can only do pension-sharing if she applies for her own CPP, so that could be another factor in favour of applying early. The only benefit is tax-savings, and this would only be the case if your father's taxable income was in a higher tax bracket than your mother's, prior to pension-sharing.

3) Life expectancy, survivor benefits, other income sources, expenses etc...
 

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This is doggers thread so I respectfully add

You should ensure your father asks for his CPP to be retroactive to his 70th birthday. If he just realized he's eligible for it he likely doesn't know it can be retro active for up to 11 months prior to the date of application. Since, from your post it seems your parents may not be aware of certain things I'd double check that his pension continues to your mother after his death. That may well be the case but it might be at a reduced amount.
Given the way a CPP survivor pension is calculated there may be merit to your mother not starting her CPP until age 70. If Dad dies and Mum has not started hers she will get 60% of his calculated age 65 amount. If Mum has started hers then she is guaranteed to get less than 60% of his and possibly significantly less.

BTW - Is your Dad collecting OAS - (Old Age Security)?
 

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Discussion Starter · #798 ·
ain things I'd double check that his pension continues to
This is doggers thread so I respectfully add

You should ensure your father asks for his CPP to be retroactive to his 70th birthday. If he just realized he's eligible for it he likely doesn't know it can be retro active for up to 11 months prior to the date of application. Since, from your post it seems your parents may not be aware of certain things I'd double check that his pension continues to your mother after his death. That may well be the case but it might be at a reduced amount.
Given the way a CPP survivor pension is calculated there may be merit to your mother not starting her CPP until age 70. If Dad dies and Mum has not started hers she will get 60% of his calculated age 65 amount. If Mum has started hers then she is guaranteed to get less than 60% of his and possibly significantly less.

BTW - Is your Dad collecting OAS - (Old Age Security)?
These are all very good points to add and everyone should feel free to respond. Thanks!
 

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1) The fact that she's not going to be working between age 60 and 65 is definitely a factor that favours taking it at age 60, but it's not the only factor and shouldn't by itself be enough of a reason. Not working between age 65 and 70 doesn't mean much, because her "calculated CPP won't decrease any more during those years.

2) They can only do pension-sharing if she applies for her own CPP, so that could be another factor in favour of applying early. The only benefit is tax-savings, and this would only be the case if your father's taxable income was in a higher tax bracket than your mother's, prior to pension-sharing.

3) Life expectancy, survivor benefits, other income sources, expenses etc...
This is doggers thread so I respectfully add

You should ensure your father asks for his CPP to be retroactive to his 70th birthday. If he just realized he's eligible for it he likely doesn't know it can be retro active for up to 11 months prior to the date of application. Since, from your post it seems your parents may not be aware of certain things I'd double check that his pension continues to your mother after his death. That may well be the case but it might be at a reduced amount.
Given the way a CPP survivor pension is calculated there may be merit to your mother not starting her CPP until age 70. If Dad dies and Mum has not started hers she will get 60% of his calculated age 65 amount. If Mum has started hers then she is guaranteed to get less than 60% of his and possibly significantly less.

BTW - Is your Dad collecting OAS - (Old Age Security)?
Thank you for both of your response.

We will definitely double check for his pension and thank you, we will ask for a retro-active for the 11 months prior.

Good to know, they will need to take both aspects into account for when she turns 60 and they will have to decide on what to do (claim at 60 for pension-sharing VS 60% of his calculated age 65 amount). His income has always been higher than hers and the accountant would income split at the time of their tax filling.

My father has not collected OAS. His income is currently around 100 000$. Should he claim it or is it more beneficial in the long run for my mother if he doesn’t collect it?
 

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He definitely should claim his OAS immediately. It is also retroactive up to max 11 months prior to application. He should only back date it to the month following his 70th B/day. Provided he has 40 years in Canada before age 65 he will get the max age 65 amount (if he has less years its prorated) plus 36% because he's starting it at 70 so about $870 a month. However OAS does get clawed back when income hits about 80,000 at the rate of 15% so he will have some claw back if his income is 100,000, but he will still get a lot (about 7500 yr) and as his income will likely drop when he retires the claw back amount will also drop. His OAS has nothing to do with your Mum claiming anything, but where possible income should be shifted to her to reduce his income and the clawback and to be income tax efficient. When he starts his work pension up to 50% can be split with her.

I see Dad has made 30 years of CPP contributions so they've been here a while but OAS is based on years in Canada after age 18. How many years in Canada? That info is needed to be more accurate.
 
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