maple moments.

Hi,
I paid CPP for some years in Canada. Was out the country for 18 months, deemed Non Resident. Will return to Canada soon. Can I pick up where I left off with Canadian Pension Plan contributions?

Would simply mean a gap which then carries on when resident again.

I realise this was likely answered already somewhere.

Thanks.

JonboyE

Yes. You cannot make up missing years though the formula to calculate your final pension amount drops some years (low earning years) out of the calculation. Missing 18 months may not be too detrimental.

maple moments.

Thank you JonboyE.
Very useful to know. My total contributions will likely be 15 to 20 years if I reach retirement age. I think 20 years is required if you plan to draw the pension outside Canada. E.g. retire back to the UK.

Cheers

JonboyE

It is Old Age Security that has the 20 year requirement if you retire overseas. If you qualify for a CPP pension it will be paid wherever you live.

maple moments.

I see. Thanks again JonboyE, you're a mind of information on these things
So basically if you had 15 years then moved to another country, CPP would pay you based on calculations for the 15 year period? Not sure how much it would be, do they have a website where you can calculate what you'd get? I have about 8 years paid in. Employer pays towards it too.

Just wonder if you know much about RSPs? Again employer contributes and of course tax relief. As I would be working another 17 yrs or so, not sure if I'd get much of a return as it's a relatively short period.

Cheers.
MM

JonboyE

Well, you did ask ...

http://retirehappy.ca/how-to-calcula...ement-pension/

I am not a pensions adviser but employer contributions to an RSP is free money to you so it is hard to see why it would not be a good thing.

Geordie Lass

Sorry to hi jack but I have a question JonBoyE

Can I claim CPP as an expense on my annual accounts as I am a sole proprietor? (I'm getting different answers from accountant vs book keeper)

Thanks.

JonboyE

Sort of. You do not include it as an expense when calculating your trading income on schedule 2125. However, you can deduct half the CPP you pay from total income on your tax return (line 222) and claim a tax credit on the other half (line 308).

Steve_

Yes, it clearly is an expense to the company. Like salaries and wages. How you put it on T2125 I'm not sure as I've got a CCPC, but it definitely is an expense.

Steve_

Well the most useful thing to know about CPP is that it pays out virtually bugger all, even if you have the maximum contribution level for 40 years (unlikely) you get a quarter of the CPP amount, which works out to something like $12,500 a year (depending on when you claim it). Not many people are earning the equivalent of $52,000+ for 40 years. But you do get OAS as well I suppose. So say you get 20 years of contributions you're looking at a shade over $6,000 a year. Ooooh.

If you're from the UK, make sure you make voluntary NI contributions.

CPP is a really really stupid tax, it's very regressive and is next to useless.

All this talk in the press about CPP reform - well baby boomers now are aged 50-70, and you can claim CPP at the age of 60. So say they raise the CPP tax, it won't really help baby boomers because they're too old. Say you're 55, a few years of higher contributions won't make much difference.

They should have done it back in the 1980s when the Americans reformed Social Security.

At this point the only way of improving it would be to say after X years you get Y fixed amount, as they do in the UK.

PMM

Hi


1. Suggest you check out the actual YMPE for CPP here: Canada Pension Plan rate table The maximum salary 40 years ago was $5K for maximum contribution of $79.20 for the year.

Steve_

Yeah but that's indexed with inflation, at least it looks as though it is. In today's money, you would have to earn $53,600 a year for 40 years to get the maximum CPP payout.

Hardly anyone does that. Even if you contribute for 40 years, not many people start out earning that kind of money.

It's almost a joke really, they were even talking recently about immigrants being able to "buy in" by voluntarily paying for years they had missed. Which forced people to take out their calculators and realize what an incredibly bad deal that would be and no-one in their right mind would do it.

CPP contributions (including the employer half) are around $5,000 a year, so say you immigrate at 35 and work until you're 65, you've missed 10 years of contributions. That means you've lost about $3,200 of CPP a year, assuming you claim it at 65.

Who would do that, especially considering you would pay in the money when you arrive or not long after, not when you hit 65. Pay out $50,000 now so you can get an extra $3,200 a year 30 years from now. Crazy. You'd have to live until you're 80 just to get your money back!

It's a terrible tax, it's regressive, i.e. people on lower incomes pay proportionally more, because obviously, a person earning $100,000 a year is paying the same amount as someone who earns $55,000 a year.

So it's regressive and the benefits are mediocre.

Like I said, it should have been reformed back in the 1980s when the Americans reformed Social Security.

But then, there are Canadians who have CCPCs and pay out everything as a dividend. The Govt. has very carefully set the corporation tax level and dividend tax credit so they get the same amount as if you paid CPP, but then you get no benefit. People who do that are idiots, to be blunt.

Geordie Lass

Thanks - I'll tell my accountant. I don't do the forms myself. Wouldn't know where to begin to be honest.

maple moments.

Thanks again Jon. I'll take a look at the website. Yes RSPs seem to be a good option overall, given the employer contributes and there's some tax relief. Though yes you get taxed to some extent when it's withdrawn. With pensions running a long time over many years for most people, the govt. keep moving the goalposts.


Cheers.