Took time off to raise your kids? You could be entitled to more CPP
If you’re a parent who is currently taking or has previously taken time off to raise your children, you may be entitled to more money going towards your CPP retirement pension.
According to the Government of Canada, this is due to “child-rearing provisions,” which protect the value of your CPP benefits when your income has dropped or you’re not earning any income at all.
If you were unaware of child-rearing provisions, here’s what you need to know and how to apply.
How do you qualify?
You may qualify for child-rearing provisions if you or your spouse or common-law partner received Family Allowance payments or qualified for the Child Canada Benefit (CCB), even if you didn’t receive the benefit.
You also must have had low or no earnings because you were the primary caregiver of a dependent child under the age of seven.
The government also has criteria for what counts as a primary caregiver. This is a person “who was most responsible for the day-to-day needs of a child or children for the specified periods.”
Child rearing “drop-out” vs “drop-in”
There are two ways the government may apply child-rearing provisions.
The first is referred to as a “child-rearing drop-out,” and it is applied when the base component of your CPP benefit is calculated.
The base component (also known as the original component) is calculated based on earnings between the year’s minimum and maximum pensionable earnings.
The government will “drop out” or essentially not include the months during the time you were the primary caregiver of a child under seven and had little to no earnings.
This will only be done if your benefit amount increases. The “drop-out” could help you qualify for the CPP disability benefit.
This could also assist you in meeting the contributory requirements to the CPP to give benefits to your estate and survivors if you pass away.
“Child-rearing drop-in” is applied when the enhanced component of your CPP is calculated.
The pension credits will “drop in” for any year during that period when you made little to no earnings.
These pension credits will only be received if they exceed your earnings. Furthermore, the credits are based on the enhanced CPP contributions in the five years before you became a primary caregiver.
The enhanced component is phased out after 2019, and these pension credits will help increase the value of your benefits if you were making little to no income after January 1 of that year.
How do you apply?
If you want to apply for child-rearing provisions, you can do so through your My Service Canada Account (MSCA) when you apply for any CPP benefit.
If you’re applying for retirement or disability benefits, you can do so directly on the child-rearing sections 1A and B in the application form for the CPP retirement pension (ISP1000) or the application for a CPP Disability Benefit (ISP1151).
However, you’ll need to complete the child-rearing provision form (ISP1640) separately if you’re applying for other CPP benefits.
Other essential information you’ll need to include when applying are your child’s name, date of birth, SIN (or proof of birth), and proof of entry into Canada if they were born outside the country.
Find out more information here.