Understanding Changes to the Canadian Pension Plan Death Benefit & Survivor Pension
In December 2017 the Canadian government released a suite of changes to the Canadian Pension Plan. Among these changes were changes to the way the Death Benefit is calculated and the eligibility criteria for the Survivor Pension. These changes do not come into effect until 2019. Below the current rules for both the Death Benefit and the Survivor Pension are outlined and the changes explained.
Current Death Benefit Calculation
What Is It?
The Canadian Pension Plan Death Benefit is a one time, lump sum payment to the estate of the deceased Canada Pension Plan contributor.
Only persons who made contributions to the Canada Pension Plan are eligible for the Canada Pension Plan Death Benefit. The Canadian government further stipulates that they must have made contributions for the lesser of one-third of the calendar years in their CPP contribution period but no less than 3 calendar years or 10 years. Canada also has international social security agreements with countries that offer similar pension programs. This allows those that have lived or worked outside of Canada to potentially satisfy the CPP contribution requirements. The social security agreement may also make you eligible for pension benefits in another country.
How Much Will I Receive?
The amount you are eligible to receive under the CPP Death Benefit will vary on a case by case basis because it is dependent on how long the deceased contributed, if at all, to the Canada Pension Plan. In 2016 on average per case the Canadian government paid approximately $2,300 to a maximum of $2,500 for the death benefit.
You can approximate the amount of the death benefit by calculating the amount that the CPP retirement pension is or would have been if the deceased had been 65 years of age at the time of death. The death benefit is usually equal to six months of the person’s retirement pension up to the maximum of $2,500.
Changes to Death Benefit Calculation
In 2019, upon a CPP contributor’s death, a lump sum payment of $2,500 to the estate will be guaranteed instead of being calculated based on the deceased’s earnings.
Current Survivor Pension Eligibility Criteria
What Is It?
The Canada Pension Plan Survivor’s Pension is paid to the person who, at the time of death, is the legal spouse or common-law partner of the deceased contributor.
The Survivor Pension amount depends on several criteria. Those being the surviving spouse/common-law partner’s age, whether you are also receiving a CPP disability benefit or retirement pension, and how much and for how long the deceased contributed to CPP.
How much will I Receive?
The Canadian government first calculates the amount the CPP retirement pension is or would have been if the deceased had been age 65 at the time of their death. They then calculate based on the survivor’s age at the time of the contributor’s death.
- Survivors age 65 or more will receive 60% of the contributor’s retirement pension, if they are not receiving other CPP benefits
- Survivors 45-64 will receive a flat rate portion
- Survivors age 45-64, under 45 and are disabled according to CPP legislation, and or are raising dependent children will receive a flat rate portion plus 37.5% of the contributor’s retirement pension if they are not receiving other CPP benefits
- Survivors under the age of 45 and are not disabled and not raising dependent children will receive a flat rate portion minus 1/120 for each month the survivor is under the age of 45 at the time of the contributor’s death
- Survivors under the age of 35 who are not disabled or raising dependent children will not be paid until they reach 65 years of age or become disabled
Changes to Survivor Pension Eligibility Criteria
In 2019, upon a CPP contributor’s death, a Survivor Pension will be paid out to all surviving spouses regardless of the deceased age, dependent children or disability. Those that have been previously denied a Survivor Pension due to their age will be eligible to re-apply for the pension in 2019. Those applying for the pension that are under the age of 45 will no longer see a reduction in their amount. Those currently receiving a Survivor Pension, whose pension was reduced, will receive an automatic bump in their payment amounts.