By Stan Swartz, CMA, CFP, CMC
January 4, 2012
If you are under the age of 65 and earn employment income, you and your employer will have to make CPP/QPP contributions for 2012.
Employed individuals who are at least 65, but under 70 will be subject to CPP/QPP, even if you are currently receiving a CPP/QPP pension, unless you elect to stop contributing. How do you stop contributing? Just complete and file Form CPT30, Election to stop contributing to the Canada Pension Plan with the CRA. You must also provide a copy of the CPT30 to all current and future employers. The election remains in effect until you revoke it (by filing Form CPT30), or until you reach the age of 70.
If you elect to stop contributing to CPP/QPP, the election takes effect on the first day of the month following the date the CPT30 is given to your employer. So to not contribute in January 2012, the form would have needed to be submitted in December 2011.
The election applies to all pensionable income. However, if your only source of income is from self-employed earnings, do not use Form CPT30. Instead, complete Schedule 8, CPP contributions on self-employment and other earnings, with your annual personal income tax return.
Making CPP/QPP contributions will increase the total CPP/QPP benefits you receive. Electing to stop making contributions will reduce your total CPP/QPP retirement pension which is calculated as 25% of your average pensionable earnings during the contribution period (starts when you’re 18 or 1966, whichever is later and ends when you begin collecting CPP/QPP).
Want to know what this means for you? Try this CPP benefits calculator. You will need your current CPP statement of contributions which you can request online from Service Canada.