A small piece of your monthly Canada Pension Plan benefit is missing if you retired recently and chose to start payments immediately rather than delay them.
The amount involved is as much as $4.51 a month if you retired at the age of 65 at the beginning of this year, not enough to draw the attention of anyone besides Doug Runchey of DR Pensions Consulting. Mr. Runchey has found roughly 30 cases of people who are receiving less than they are entitled to.
The missing amounts are connected with the CPP enhancement project, which in 2019 began a process of gradually increasing premiums for workers and employers to fund a more substantial retirement benefit for retirees of the future.
If you had employment income in 2019 or later and then retired and started CPP, you are entitled to a token amount of enhanced CPP in your monthly benefit. The non-payment of this amount was confirmed by Employment and Social Development Canada.
“People who retired after Jan. 1, 2019, are receiving monthly payments of regular CPP retirement benefits only,” the department said in an e-mailed response to questions. “The enhancement portion of the CPP benefits will be calculated and paid once earnings and contributions information can be processed by ESDC. Ongoing work continues to implement all necessary system changes related to CPP enhancements.”
People who made enhanced CPP contributions in 2019 or later and then retired will be paid retroactive to when they began to collect CPP, the department added.
“I have no doubt that, eventually, they’ll get the systems reprogrammed and start paying the benefit,” said Mr. Runchey, who advises clients on when to start CPP. “I’d just like to see some, ‘Whoops, sorry, we apologize that we’re two-years-plus behind and we’re doing our best and keeping people apprised of steps along the way.’”
ESDC could not provide an estimate of how many people currently receiving a CPP retirement benefit would be eligible for an additional enhanced component. But it said the most recent report from the Chief Actuary of Canada, from 2019, estimated there would be 655,000 people receiving an enhanced amount in 2021.
The federal government and provinces struck a deal to enhance the CPP in 2016. In 2019, workers and employers began a five-year phase-in of premium increases that would fund a retirement benefit equal to 33 per cent of income to a set limit by 2065, up from 25 per cent before enhancement.
The premium increases have been introduced on schedule, ESDC confirmed. Mr. Runchey confirmed that enhanced CPP is included when you go on the federal government’s Service Canada website to see what your estimated CPP entitlement is. The breakdown between collecting higher premiums and paying more in benefits was discovered by Mr. Runchey a little more than a year ago when advising a client on how much CPP to expect.
The client was actually receiving roughly $3 less a month than Mr. Runchey estimated and wanted to know whether he was being paid correctly.
“I said, no, they’re not paying you the enhanced portion yet,” Mr. Runchey said. Later, he found more than two dozen other cases of underpayment after asking around on some online financial forums. Calls to Service Canada to inquire left him with the impression that front-line staff were unaware enhanced benefits were not actually flowing to retirees.
You’ve been underpaid CPP retirement benefits if:
- You received employment earnings after Jan. 1, 2019, and thus paid at least a little of the higher CPP premiums charged under the enhancement project.
- You started CPP in February, 2019, or later.
- You chose to start CPP retirement benefits immediately instead of delaying to as late as 70 in order to get a bigger monthly payment.
Mr. Runchey said the monthly amount of enhanced CPP would be $4.51, assuming you were 65 in December, 2020, started receiving CPP in January, 2021, and met the maximum pensionable earnings threshold of $57,400 for 2019 and $58,700 for 2020. Someone who started CPP at the beginning of 2020 would get a maximum of $1.47 a month.
“It’s not a large amount,” Mr. Runchey said in describing the missed payments. “But it’s becoming larger as the delay extends.”
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