Pensions & Withdrawal


We all are well aware that in order to have a pleasant retirement we need to have a good pension. A logic statement that sometimes is forgotten or in many cases impossible to be accomplished.

The Canada Pension Plan is a contributory, earnings-related program. It forms one of the two major components of Canada’s public retirement income system, the other component being Old Age Security (OAS). Other parts of Canada’s retirement system are private pensions, either employer-sponsored or from tax-deferred individual savings (known in Canada as a RRSP’s).


The CPP program mandates all employed Canadians who are 18 years of age and over to contribute a prescribed portion of their earnings income to a nationally administered pension plan. The plan is administered by Human Resources and Social Development Canada on behalf of employees in all provinces and territories except Quebec, which operates an equivalent plan.

The CPP is funded on a “steady-state” basis, with its current contribution rate set so that it will remain constant for the next 75 years, by accumulating a reserve fund sufficient to stabilize the asset/expenditure and funding ratios over time. Such a system is a hybrid between a fully funded one and a “pay-as-you-go” plan. In other words, assets held in the CPP fund are by themselves insufficient to pay for all future benefits accrued to date but sufficient to prevent contributions from rising any further. While a sustainable path for this particular plan, given the indefinite existence of a government, it is not typical of other public or private sector pension plans.


The government of Prime Minister Lester B. Pearson in 1966 first established the Canadian Pension Plan. Contribution rates were first set at 1.8% of an employee’s gross income per year with a maximum contribution limit. By the mid-1990s though this low contribution rate increase was not sufficient to keep up with Canada’s aging population. As a result the total CPP contribution rates for both employee and employer together were raised to an annual rate of 9.9 per cent by 2003.

  • At its inception, the prescribed CPP contribution rate was 1.8% of an employee’s gross income up to an annual maximum. Over time, the contribution rate was increased slowly. However, by the 1990s, it was concluded that the “pay-as-you-go” structure would lead to excessively high contribution rates within 20 years or so, due to Canada’s changing demographics, increased life expectancy of Canadians, a changing economy, benefit improvements and increased usage of disability benefits The same study reports that the reserve fund was expected to run out by 2015. This impending pension crisis sparked an extensive review by the federal and provincial governments in 1996.


In 2011, the prescribed contribution rate is 4.95% of a salaried worker’s gross employment income between $3,500 and $48,300, up to a maximum contribution of $2,217.60. The employer matches the employee contribution, effectively doubling the contributions of the employee. If a worker is self-employed, he/she must pay both halves of the contribution. The rate of 4.95% has been in effect since 2003…

When the contributor reaches the normal retirement age of 65 (a reduced pension is available from age 60), the CPP provides regular pension benefit payments to the contributor, calculated as 25% of the average contributory maximum over the entire working life of a contributor (not just the last 5 years). There are provisions that enable the lower-earnings years in a contributor’s contributory period to be dropped out due to disability, child rearing, or other reasons.  CPP benefit payments are taxable as ordinary income. The CPP also provides disability pensions to eligible workers who become disabled in a severe and prolonged fashion, and survivor benefits to survivors of workers who die before they begin receiving retirement benefits. If an application for disability pension is denied, an appeal can be made for reconsideration, and then to the Canada Pension Plan / Old Age Security Review Tribunals or Pension Appeals Boards (POA).

Cp Paralegal Services can give you advice on all pension matters or represent you at the pension board.

There are three kinds of Canada Pension Plan benefits:


  • disability benefits (which include benefits for disabled contributors and benefits for their dependent children);
  • retirement pension; and
  • survivor benefits (which include the death benefit, the survivor’s pension and the children’s benefit).

Canada Pension Plan Retirement Application

What you need before you begin:

  • Your Social Insurance Number (SIN);
  • If you wish to arrange for Direct Deposit, please have the financial institution number of your bank, the branch and account number;
  • If you lived or worked in a country other than Canada and want to apply for benefits from that country, give details of when you worked or lived outside Canada and your Social Insurance Number there;
  • Your spouse or common-law partner’s SIN, if you want to take advantage of pension sharing for possible tax savings; and,
  • If you were the primary caregiver of any child(ren) or received Family Allowance or Child Tax Benefits while they were under the age of 7, you need to provide:
    • the SIN of each child; and,
    • the date of entry into Canada for each child born outside of Canada.

When do you want your pension to start?

You can start to receive your retirement pension at any time between the ages of 60 and 64, at the age of 65, or after the age of 65.

How to decide when to take your retirement pension?

The decision is yours. It depends on your personal circumstances. You should consider the following:

  • whether or not you will work after the age of 60;
  • how much and how long you have paid into the CPP so far;
  • your other retirement income;
  • if you have a company pension plan, check with your employer to see if it will be affected by your CPP pension;
  • your current health and family health history; and
  • your retirement plans.

What happens if you don’t work after the age of 60 and delay receiving your pension until you turn 65?

For many in this situation, the extra 5 years of no earnings will lower the amount of CPP retirement pension payable at age 65. This is because the period you are expected to pay into the CPP continues until you start receiving your retirement pension. For this reason, you should carefully consider your personal situation when deciding when to start your CPP retirement pension.

When to apply

We suggest that you apply approximately 6 months before you want your pension to start.

Proof of birth

You do not need to provide proof of birth with your Signature Page. However, the Canada Pension Plan has the right to request proof of birth at any time, when deemed necessary.

Children born after 1958

If you have children born after 1958, the Child Rearing Provision may help you receive a higher Canada Pension Plan benefit amount. The amount of benefits paid under the Canada Pension Plan is based on how long and how much you contributed to the Plan while you were working, and in some cases your age when your benefit begins. Periods of time when you had no or low earnings, normally result in a lower benefit amount.

If you were not working or had low earnings while caring for a child under the age of seven, the Child Rearing Provision can be used to exclude these time periods from the calculation of your benefit. This may help you qualify for benefits or increase the benefit amount you can receive.

Certified photocopies of original documents

It is better to send certified photocopies of documents rather than the originals. If you choose to send original documents, send them by registered mail. We will return the original documents to you.

Taxes and your pension

Your CPP retirement pension is taxable. We will not deduct income tax from your monthly payment unless you request it. Once we have approved your pension, we will send you a letter stating the amount of your pension. It will give you information on how to ask for income tax to be deducted. You may also obtain the tax deduction request form and mail it with your application.


You may be entitled to receive a CPP disability benefit if you have stopped working because of a disability, are under age 65, and have made sufficient contributions to the CPP. Your disabling condition can be physical or mental. The Canada Pension Plan legislation says that your disability must be “severe and prolonged”.

“Severe” means your condition prevents you from working regularly at any job, and “prolonged” means your condition is long term and may result in your death.

Unable to apply

If, due to a medical condition, you were unable to apply earlier or to ask someone to apply on your behalf, please contact us and we will help obtain a form called “Declaration of Incapacity“. If you meet all of the eligibility requirements filling out and returning this form may allow you to receive your pension with an earlier start date.

CP Paralegal Solutions can give you an advice on all pension matters and prepare your retirement application, avoiding delays and mistakes.

Privacy and Security

The Government of Canada is taking the necessary measures to protect the confidentiality of the personal information you provide and to ensure that your electronic transactions with us are secure. In order to register you for a Canada Pension Plan retirement pension we require certain personal information from you. This statement explains the purpose of collection and use of your personal information.

The collection, use and disclosure of personal information for this service is authorized and regulated by the Canada Pension Plan Act. We will use this information to process your Canada Pension Plan (CPP) retirement application. Generally only information needed for registration will be requested. However, in some cases, information is requested to help us determine possible entitlement to other benefits under the Canada Pension Plan. In limited instances, we can share your information without your consent, but will do so according to the Privacy Act.

The information you provide is protected under the Privacy Act and applicable departmental legislation. Under the Privacy Act, you have the right to access your personal information and request changes if the information is incorrect. Instructions on how you can exercise these rights are outlined in Info Source publications, a copy of which is available at any Service Canada Centres.

Questions or comments regarding the administration of the Privacy Act in our Department may be directed to the Access to Information and Privacy Coordinator at:

Access to Information and Privacy
140 Promenade du Portage
Phase IV, Level 1, Mail stop 112
Gatineau, Québec, K1A 0J9
Tel: 819-994-0416
Fax: 819-953-0659


Also known as “pension funds”, SUPLEMENTAL PENSION PLANS are provided by your employer. They provide a supplemental pension at a predetermined age and under predetermined conditions.

When you contribute to an employer-sponsored plan, you receive a statement of benefits twice a year that shows the investment income you have accumulated and the possible pension you may receive from the plan when you retire.

What happen if you decide to stop working before the retirement age?

You will not contribute any longer, but your fund will continue to be handled as if you were employed and you will start receiving benefit when you decide to retire

Your fund is transferred to a locked-in plan, either a locked-in retirement account (LIRA) or a locked-in RRSP. In this case, if you want your money to continue to grow tax-free, you must transfer it to a life income fund (LIF).

To receive a pension from an SUPLEMENTAL PENSION PLAN, you must be at least 55 years old, ten years of the standard retirement age. Your benefits will be paid in a monthly base for the rest of your life.

Registered Retirement Savings Plan

A Registered Retirement Savings Plan or RRSP is a type of Canadian account for holding savings and investment assets. The RRSP’s purpose is to promote savings for retirement by employees. It must comply with a variety of restrictions stipulated in the Canadian Income Tax Act. Rules determine the maximum contributions, the timing of contributions, the claiming of the contribution tax credit, the assets allowed, and the eventual conversion to an RRIF (Registered Retirement Income Fund) in retirement. Approved assets include: savings accounts, guaranteed investment certificates (GICs), bonds, mortgage loans, mutual funds, income trusts, corporate shares (stocks), foreign currency and labour-sponsored funds.

RRSPs have five effects:

  1. Taxes on earned (employment) income are deferred until the eventual withdrawals from the plan. There is no benefit from the deferral because it is an accrued liability that grows at the same rate as the investments themselves. The tax deferred is commonly called the contribution tax credit.
  2. Income earned inside the plan on the after-tax savings (excluding the contribution tax credit) is not taxed either while within the plan or on withdrawal.
  3. One’s marginal tax rate when withdrawing cash may be higher (or lower) than the rate at which one claimed the original contribution credit.
  4. Canada has a variety of programs available to retired people whose benefits decrease as one’s income increases. By deferring the income until retirement, the additional income created at that time may reduce those benefits.
  5. Claiming the contribution tax credit may be deferred until a later year (when the expected marginal tax rate is higher), but there is a penalty for the delay.


There may be a time in which you can not meet the ends; but, if you have contributing to a private pension, you may have the opportunity to find some relief cashing part of your RRSP’s or if you comply with the requirements of the Financial Services Commission of Ontario (FSCO) some portion or all of your retirement funds.

What is a locked-in retirement savings account?

If you were entitled to a deferred pension at the time you terminated your membership in a registered pension plan, one of your options was to transfer the value of your pension benefit into a locked-in retirement savings account. This type of account is exclusively for money earned in a registered pension plan, and generally speaking, any money transferred into it must remain “locked in”. This means that the money payable to you from this account can be used only to provide retirement income, which normally means that you must wait until you reach age 55. Also, while your money is locked in, it cannot be seized by creditors.

In Ontario, there are three types of locked-in accounts:

  • Locked-in Retirement Account (LIRA),
  • Life Income Fund (LIF), and
  • Locked-in Retirement Income Fund (LRIF).

CP Paralegal Solutions can give you an advice on all pension matters and prepare your retirement application, avoiding delays and mistakes.

Important points to consider before you apply

Before you apply for special access to your LIRA, LIF, or LRIF, please make sure that it is subject to Ontario law, and not to federal legislation or the law of another province or territory (another jurisdiction). For example:

  • If you worked for a federally regulated industry such as banking, telecommunications, or airline transportation, your locked-in account is likely subject to federal law.
  • If your pension was earned as a result of employment in another province, the money in your locked-in account is governed by the pension law of that province. It does not matter if the pension plan was registered in Ontario – what matter is where the pension was earned.

If your locked-in account is subject to the law of another jurisdiction, you will not be able to withdraw the money under Ontario law. Instead, you will have to seek information from that jurisdiction to see if it provides for special access. If you’re not sure which law applies, check with your former pension plan or the financial institution that administers your locked-in account.

  • Once your money is withdrawn from a locked-in account, it can be seized by creditors.
  • Money withdrawn from your locked-in account is taxable, and income tax will be deducted at the time the withdrawal is made.
  • Withdrawing money from your locked-in account may affect your eligibility for certain government benefits, such as social assistance.
  • If you have a spouse, in most cases your application will require your spouse’s signed consent to withdraw money from a LIRA, LIF, or LRIF.
  • Your application must be received within 60 days of the date it is signed. Otherwise, it cannot be accepted. This applies to all applications for special access to locked-in accounts, whether they are made to the Financial Services Commission of Ontario (FSCO) or to your financial institution.

Under what circumstances can you apply for special access?

You may be able to gain special access to your Ontario locked-in account(s) if:

  • You have an illness or physical disability that is likely to shorten your life expectancy to less than two years.
  • You are at least 55 years old and the total value of the funds in your Ontario locked-in account(s) is less than a specified amount ($18, 880 in 2010).
  • Your locked-in assets exceed federal Income Tax Act limits.
  • You are facing specific types of financial hardship.

Shortened life expectancy

You can apply to withdraw some or all of the money in your LIRA, LIF, or LRIF if you have an illness or physical disability that is likely to shorten your life expectancy to less than two years. Your application must include a signed statement attesting to your condition from a medical doctor who is licensed to practise in Canada.

Some pension plans allow members to withdraw money in these circumstances on more generous terms than under the legislation. You might want to check if the terms of your former pension plan include this type of provision. If so, contact the financial institution which administers your LIRA, LIF, or LRIF to take advantage of those provisions.

The financial institution that administers your locked-in account will provide you with the appropriate application form and information, but you must apply to your financial institution, not to FSCO.

Age 55 and a minimal amount of money in your LIRA, LIF, or LRIF

If you are age 55 or older and the total value of the funds in all of your Ontario-regulated locked-in account(s) is less than a specified amount ($18,880 in 2010), you can choose to withdraw all of the money and close the account(s).

The specified amount changes each year and cannot be more than 40% of the Year’s Maximum Pensionable Earnings (YMPE), a term used in the Canada Pension Plan. The YMPE is determined each year according to a formula based on average wage levels, and is published annually by the Bank of Canada.

The financial institution that administers your locked-in account will provide you with the appropriate application form and information, but you must apply to your financial institution, not to FSCO.

An amount that exceeds federal Income Tax Act limits

A locked-in account containing assets that exceeded the maximum transfer amount allowed under federal tax law is subject to a penalty payment each year. If you are in this situation, you can apply to withdraw the excess assets, and any investment income earned on those assets, in order to avoid paying a penalty in the future.

Your application must document the precise value of the excess amount of assets that were transferred from your former pension plan into your LIRA, LIF, or LRIF. You will need a letter that provides this information from either the administrator of your former pension plan or the Canada Revenue Agency.

The financial institution that administers your locked-in account will provide you with the appropriate application form and information, but you must apply to your financial institution, not to FSCO.

Financial hardship

Under Ontario’s pension law, you may qualify for special access to your LIRA, LIF, or LRIF if you are facing financial hardship under the specific categories listed below. If you want to apply for special access to more than one locked-in account, a separate application is required for each account. Please note, however, that you cannot apply to withdraw money from any of your locked-in accounts under a category of financial hardship for which you have already successfully applied within the last 12 months. Applications based on financial hardship must be made to FSCO.

If you find yourself in any of the following situations, you may be eligible to gain access to your locked-in account:

  • Low income – Your expected total personal income from all sources, before taxes, for the next 12 months must be less than a specified amount ($31,466.67 in 2010). This amount changes every year. For up-to-date figures, contact FSCO or visit our website at
  • Risk of eviction from your home – You or your spouse are at risk of eviction due to unpaid payments on a debt (such as a mortgage) secured against your home. You have received a written demand for payment from the creditor and you need the money to avoid eviction.
  • Risk of eviction from your rented residence – You or your spouse are at risk of eviction due to unpaid rent for your residence. You have received a written demand for payment from your landlord and you need the money to avoid eviction.
  • Rent deposit – You need the money to pay the first and last months’ rent in order to rent a place to live.
  • Medical expenses – You need the money to pay for certain medical or dental expenses (e.g., prescription drugs, medical devices) to deal with an illness or physical disability for you, your spouse, or a dependant of either of you. These expenses cannot be covered by a provincial health plan, your private health insurance, or any other source. You may claim for expenses already paid or those you will incur in the future, as long as they meet these criteria. You must provide a doctor’s (or a dentist’s) letter stating that the treatment is necessary.
  • Residential renovations, alterations, or construction to accommodate an illness or physical disability – The illness or disability must affect you, your spouse, or a dependant of either of you. The renovations or alterations can be made to your home or the dependant’s home. The money can also be applied to the cost of including features in the construction of a new home that accommodate an illness or disability. You must provide a doctor’s letter stating that the renovations, alterations, or construction are necessary to accommodate the illness or disability.

Where do you apply?

If you are applying for special access under the category of financial hardship, you must apply to FSCO for the consent of the Superintendent of Financial Services at FSCO.

Superintendent of Financial Services

Financial Hardship Unlocking Section

5160 Yonge Street, Box 85
Toronto ON M2N 6L9
General inquiry: (416) 250-7250
Fax: (416) 226-7880
Toll-free: 1-800-668-0128
TTY toll-free: 1-800-387-0584

Applications under all other categories (shortened life expectancy, age 55 and minimal amount, or amount exceeding federal tax limits) must be made directly to the bank, insurance company, or other financial institution that administers your LIRA, LIF, or LRIF. Your financial institution will provide you with the appropriate application form and information.

If you are applying to FSCO based on financial hardship…

FSCO will give prompt and careful attention to applications based on financial hardship, but FSCO cannot consent to the withdrawal of money unless your situation meets the strict rules set out in Regulation 909 under the Pension Benefits Act. Therefore, before you apply, please make sure that your financial hardship situation falls into one of the qualifying categories described above. If it doesn’t, your application cannot be approved.

You may be expected to use some of your assets to deal with your financial hardship situation. The law requires that the value of your assets be deducted from the amount of money you are applying to withdraw from your LIRA, LIF, or LRIF. However, there are many types of assets that you are not expected to use in this situation. These include:

  • your principal residence,
  • a personally operated business or farm (to a limit of $50,000),
  • motor vehicles,
  • essential tools of trade necessary to employment, and
  • personal items (e.g., clothing, jewellery).

The law requires that you qualify to withdraw at least $500, after deducting the value of the relevant assets. Your application cannot be approved if, after review, you are only eligible to withdraw an amount that is less than $500. The same rules apply to any assets owned by your spouse, and to the dependant’s assets if you are applying to help a financially dependent person.

Therefore, before you apply, it’s a good idea to make a detailed list of your assets, and any assets belonging to your spouse (if you are living together). If you are making an application in order to help a family member who is financially dependent on either you or your spouse, you should also make a list of any assets belonging to that person.

Dependent family members

The dependant must be a child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece, or nephew of you or your spouse. The dependant must rely on you or your spouse for support during the calendar year that you make your application, or during the previous calendar year.

About FSCO

FSCO is an arm’s-length agency of the Ministry of Finance. In addition to pension plans, FSCO regulates insurance, credit unions, caisses populaires, mortgage brokers, loan and trust companies, and co-operatives. FSCO works with consumers, industry stakeholders, and investors to enhance public confidence in, and access to, a fair and efficient financial services industry in Ontario.