The definitive guide to Canadian Pension Plan (CPP) in 2025: everything Canadians need to know

Getting to know the CPP

For decades, it’s been there on every pay stub: a small deduction labelled "CPP." And, for decades, it was easy enough to shrug off as just part of living in Canada.

But now you’re getting closer to directly benefiting from those decades of deductions and that little line item becomes big questions: What’s going on with CPP? And is it really enough?

The Canada Pension Plan was launched in 1965 with a simple, powerful promise: that every working Canadian would have a secure foundation for their retirement. It was a national pact, designed to give you back a piece of the life you worked so hard to build. Today, that promise is stronger than ever, with enhancements designed to replace more of your income than ever before.

But a promise can get lost in the paperwork. Navigating dense government websites and confusing forms can make you feel like you’re on your own.This guide is here to change that.

Is CPP by itself enough for retirement?

While CPP and OAS provide a reliable income floor, they likely won’t be enough by themselves to cover the cost of living in Canada—especially as it continues to rise.

Here is a look at the estimated basic monthly expenses for a single senior living in a major Canadian city in 2025, assuming they are renting.

Note: Cost of living fluctuates and varies by city. Toronto was used as the example city for housing, food, transportation, health, and miscellaneous.

Now, let's compare that to your government benefits.

• The average CPP payment is $844.53 per month
• The maximum OAS is about $734.95 per month (for ages 65-74).
• Together, they provide a foundation of approximately $1,579.48.

The math is clear. There is a significant gap between government benefits and the actual cost of living. This is why it’s so important to have other sources of income during retirement. Two great options: a Questrade TFSA or RRSP both help grow your personal savings and bridge the gap.

How much will CPP and OAS increase in 2025 in Canada?

Your CPP and OAS payments are not static, they are designed to grow with the cost of living.

• CPP payments are adjusted once a year, every January. This adjustment is based on the Consumer Price Index (CPI), the government's official measure of inflation. This ensures that your pension's buying power keeps pace with rising prices.
• OAS payments are adjusted four times a year (January, April, July, and October) based on the CPI. This more frequent adjustment helps your benefits respond more quickly to changes in the cost of living.

CPP myths that cause the most confusion

Big Myth #1: "I'll automatically get the maximum CPP payment."

The Reality:

Almost nobody gets the maximum of $1,433.00 per month. Reaching that requires making the highest possible contributions for nearly your entire working life.

The average payment ($899.67 per month) is a much more realistic number to plan with. If you end up with more, great. If not, you’ll have created a plan that lets you enjoy a dignified retirement still.

Big Myth #2: "The government can take my benefits away if I earn too much."

The Reality:

Your CPP is yours. It cannot be taken away.

This myth comes from a misunderstanding of the OAS clawback. The clawback isn't a penalty—it's a tax that only affects high-income retirees. For the July 2025 to June 2026 period, it will only begin if your net income in 2024 was above $90,997.

What’s the difference between CPP and OAS?

It’s easy to confuse the two, but they are very different programs.

• Canada Pension Plan (CPP):
  • Funding: Funded by your own contributions throughout your working years.
  • Eligibility: To qualify, you must be at least one month past your 59th birthday and have made at least one valid CPP contribution.
  • Application: You must apply for it. It does not start automatically.
• Old Age Security (OAS):
  • Funding: Funded by the government's general tax revenues, meaning you don't pay into it directly.
  • Eligibility: Available to most Canadians 65 or older who have lived in Canada for at least 10 years since turning 18.
  • Application: Service Canada can automatically enroll many people, but you may have to apply yourself.

Can I share my CPP with my partner?

Yes. The CPP was designed with families in mind, offering two key benefits:

• Pension Sharing: You can share your CPP retirement payments with your spouse or common-law partner. This lets you combine your benefits and split them, which can be a smart tax strategy if one of you has a significantly higher income.
• Child-Rearing Provision: If you spent years out of the workforce or earned less while raising your children, this provision allows those lower-earning years to be dropped from your CPP calculation. This can significantly increase the payment amount you are eligible to receive.

The most important decision: when should you take CPP?

You have a choice. You can start your pension at the standard age of 65, take it early at 60, or delay it until 70. This decision will permanently affect your monthly payments.

Big Myth #3: "I have to take my CPP at 65."

The Reality:

You are in control. While 65 is the baseline, you can and should choose the start date that fits your life. Here's how the math breaks down:

• Taking it early: For every month before your 65th birthday that you start, your payment is permanently reduced by 0.6%. If you start right on your 60th birthday, that’s a 36% reduction.
• Taking it late: For every month you delay after age 65, your payment is permanently increased by 0.7%. If you wait until age 70, you’ll get 42% more than if you had started at 65.

Bottom line: For many people, waiting until 70 is the financially optimal choice because…

• It reduces your risk. The government takes on the investment and inflation risk, not you. CPP payouts are indexed to inflation, so they keep their value when prices rise, and they aren't tied to market performance.
• It provides longevity protection. A larger pension provides better protection against the risk of outliving your money. While you receive less in your 60s, you eventually "break even" in your early-to-mid 80s. If you live into your 90s, you will have collected significantly more overall.

So what’s the trade-off? You have to fund your lifestyle from your own savings during the years you’re waiting.

Having a well-funded Registered Retirement Income Fund (RRIF) or Life Income Fund (LIF) helps give you the means to enjoy the retirement you’ve earned and delay your CPP to maximize your payments.

Other important CPP benefits you should know

While most people associate the CPP with retirement, the program also provides crucial support for individuals and families facing disability or the death of a contributor. Here’s what you need to know about two other key benefits.

The CPP disability pension

This benefit provides monthly income if you are under the age of 65 and cannot work at any job on a regular basis because of a long-term mental or physical disability.

• Who is eligible? To qualify, you must be under 65, have made enough contributions to the CPP, and have a disability that is both "severe" (prevents you from working regularly) and "prolonged" (long-term and of indefinite duration or likely to result in death).
• How much is the payment? For 2025, the maximum monthly disability pension is $1,606.78. The amount you receive is made up of a fixed monthly amount plus a payment based on your previous CPP contributions.
• What happens at age 65? Your disability pension is automatically converted to a standard CPP retirement pension when you turn 65. The amount may change, but you will not need to re-apply.

The CPP children's benefit

This benefit provides monthly payments to the dependent children of an individual who is receiving a CPP disability pension or who has died.

• Who is eligible? To receive the benefit, a child must be either under 18 years of age, or under 25 and attending a recognized school or university full-time. The parent must be a recipient of the CPP disability pension or have been a CPP contributor before their death.
• How much is the payment? The children's benefit is a flat monthly rate that is adjusted for inflation each year. For 2025, the payment is $294.12 per month for each eligible child.
• Two types of benefit: While the payment amount is the same, the benefit is technically called the "disabled contributor's child's benefit" if the parent is receiving a disability pension, and the "surviving child's benefit" if the parent has died.

Conclusion: your path forward

There’s no need to feel lost. You have the facts. You know the key dates, the real numbers, and the truth behind the myths. You see the CPP not as a complex system, but as a reliable partner in your retirement.

A confident future isn’t built by having all the answers at once. It’s built by knowing where to find them, trusting in your plan, and taking that first, meaningful step.