Hello;
The survivor pension is a monthly benefit paid to an individual who, at the time of the contributor's death, is the legal spouse or common-law partner of a deceased contributor. (CRA Website). Assuming that the deceased contributor met eligibility criteria, the amount of the survivor's benefit depends upon:
- the deceased contributory earnings and number of years of contributions
- the age of the surviving spouse or common-law partner
- whether or not the survivor is supporting any of the deceased's dependent children
- whether or not the surviving spouse or common-law partner is already receiving CPP retirement or disability benefits
Nuts and bolts of CPP survivor's benefits (When one spouse dies, what happens to their CPP?)
- it is payable from the month after death of the contributor, but is triggered only through the submission of an application
- retroactive benefits are available for up to 12 months
- CPP survivor benefit is calculated as follows: CPP will first calculate the amount of CPP retirement pension is, or would have been if the deceased had been age 65 at the time of death. Then a further calculation is done based on the survivor's age at the time of the contributor's death
- Note: what a survivors generally don't expect is that their CPP benefits will now be combined and subject to a maximum
- For 2020, the maximum survivor's pension for survivor's who are age 65 and over is $705.50/monthly. That means if both partners were getting the maximum CPP retirement pension, there will be no survivor benefits when one dies. Under current regulations, the survivor is allowed to get the equivalent of only one maximum CPP retirement benefit
- As seen above, a couple could have paid in at the maximum throughout their working lives. However, upon the death of one, the most that will be paid is one maximum retirement benefit. In a sense, one of the spouse's in this scenario has essentailly subsidized those left in the CPP pool.
- In reality, most survivor pensions are dramatically less than that amount. The average amounts for survivor pensions paid in 2016 was $411/mth for those less than age 65 and $302/mth for those 65 and older
In sum, clients should consider having adequate resources in place, including life insurance. Appropriate decisions are needed to be made with respect to other sources of retirement income (i.e. retirement benefits paid by a pension plan continue to the survivor, and/or RRIF strategies, etc) so the survivor has adequate resources until their passing.
If you would like further information, please let us know.
Sincerely,
Mike Busby (20-Aug-20)
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