Personal Finance

Can one opt-out of CPP (Canada Pension Plan) from Taxes?

  • Last Updated:
  • Feb 24th, 2010 7:45 pm
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Sr. Member
Jul 17, 2006
964 posts
123 upvotes
I can't help but think if the program was cancelled most employees would never see the extra 2000 a year being paid by the corporations anyway.
Deal Addict
Aug 13, 2007
1100 posts
34 upvotes
Don't forget CPP also pays a bit for your funeral costs to your survivor/spouse when you die...

There are three types of CPP benefits:

* a retirement pension;
* disability benefits for qualified contributors and their dependent children;
* survivor benefits for the spouse or common-law partner and dependent children of qualified contributors.

Survivor benefits include:

* a one-time lump-sum death benefit;
* a monthly survivor's pension for the surviving spouse or common-law partner; and
* a monthly children's benefit.

Helping your client: Apply for the death benefit

The CPP death benefit is a one-time lump-sum benefit.


If there is a will, the executor named to administer the estate should apply for the death benefit within 60 days of the date of death.

If there is no will, or if the executor did not apply for the death benefit within 60 days of the date of death, one of the following people should apply (payment will be made, in order of priority as numbered below, upon application):

1. The person or institution who has paid or is responsible for paying the funeral expenses.

2. The survivor, who must have been in a legal marriage or a common-law relationship with the deceased at the time of death (in the case of a common-law relationship, the couple has to have lived together for at least one year).

3. The next-of-kin of the deceased.

How much is the death benefit?

The death benefit is equal to six months' worth of the deceased's retirement pension, up to a maximum of $2,500.
Sr. Member
Nov 30, 2006
922 posts
45 upvotes
Richmond Hill
To these smart*sses that think CPP is evil. Just think of it as a diversification of your otherwise rich and potent portfolio (maxed out RRSPs and TFSAs, paid out mortgages, investment properties, etc).

For people who max out their RRSPs every year, it is actually very strange to even consider the measly $2000 of CPP contributions. And, when your risky investments blow up in smoke (hope it doesn't happen), you will have some little helping to live on from CPP.

And for poor people who never save anyways, this is a big help.

And yes, Canada is mostly socialistic now. If you don't like it, move down south :) US, then Mexico, then Puerto Rico... Lot's of options
Deal Addict
User avatar
Apr 29, 2002
3855 posts
47 upvotes
Mississauga
Honestly, if I could buy shares in CPP/CPPIB, I probably would.
Deal Expert
Aug 2, 2001
18924 posts
10494 upvotes
cheapcanoehead wrote: I agree with cheech. Main problem with the CPP was it's original design. I believe it came about somewhere in the mid 1960's under the Pearson government. Problem with it was they paid benefits to the seniors of that day even though they never paid into it. The CPP deducted from your cheque isn't growing for you, the government spends it as it comes in on today's retirees. Then in 35 years when I retire they will take from the workers of that generation to pay my pension (if you want to call it that). When I think of pension I think of a pool of money compounding for my benefit, CPP doesn't meet that definition. Max contribution per year is over $2000.00 today. This is to pay for the baby boomers who doing there careers paid 2%. What we have is a wealth transfer from Gen X to the Boomers. Gen X will get no extra benefit even though we've had to contribute at the rate of 4.95% per annum. The CPP is more of a tax than a pension. Plug into a spreadsheet roughly 4000$ per year for 30 years and a 4% growth rate. If that money was available as a pension you wouldn't need an RSP or any other savings vehicle. The CPP is a national disgrace and now our idiot government wants to provide us a larger pension by increasing our deductions. Again for political expediency to help the boomers out who had a better economy to work in in the first place
I would highly recommend you research into what CPP currently does so you don't stick your foot in your mouth even further:
http://www.thestar.com/Business/Investi ... cle/300563
Further amendments introduced by Bill C-36, which came into force on Jan. 1, 2008, assumes steady-state financing, rather than the prior pay-as-you-go funding to build a reserve equivalent to 58 years of benefit payouts. This pre-funding of the plan by soon-to-retire boomers will ease the burden on upcoming generations, says Dale, noting that the legislative amendments require that any new or increased benefits must also be fully funded.
and
"The Canada Pension Plan is sustainable for 75 years and beyond, according to the (federal government's) chief actuary. There are all kinds of safeguards in place to make sure these funds are there to pass to pensioners and for investing the fund only for their benefit."

The CPP contribution rate has been capped at 9.9 per cent, with no further increases expected for 75 years, says Dale.

"(The CPP) is self-sustaining at 9.9 per cent of earned income."



Further, your idea of $4000/year is ridiculous. Not all employers will give the portion they were contributing to the employer, so to take that into account is just plain ignorant.

CPP is a wonderful idea. Most Canadians don't save enough as it is, and without it we would be paying more in social programs to compensate for it as people with no savings retire.

I agree, in a perfect world it's not needed as everyone would save for themselves. But we are far, far away from even seeing that perfect world exist, therefore the plan is necessary.
Deal Fanatic
Feb 1, 2006
9645 posts
911 upvotes
Muskoka
Even if you want to ignore all the other reasons for keeping CPP, what I said before is a strong argument on its own...even if you are a super saver and savvy investor, and could easily do better with the money, the reality is that most Canadians are not like that. Without CPP, they will suffer in retirement, and the end result will be higher taxes for you to pay for them.

Take the pragmatic view on this, if needed, not the ideological one. Directly or indirectly, the CPP is good for all Canadians.
Newbie
Apr 1, 2001
88 posts
19 upvotes
Roblin, MB.
... you could always become a Hutterite? :idea:

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