The CanadaPension Plan – Disability Benefits (CPPD) program recently released their annual “Staying in Touch” newsletter. To find the newsletter online, visit http://www.hrsdc.gc.ca/eng/oas-cpp/cpp_disability/newsletter/sit_2012.shtml

The CPP rates rose slightly this year – a maximum CPPD pension is $1185.50/month and the average CPPD pension is $843.27/month.

As well, the Children’s Pension (for children with a parent who is receiving CPPD) pays $224.62/month. One helpful suggestion is to contact CPP should you have a child after you have started to receive CPPD so as to ensure the child amount is added to your monthly pension.

Many people wonder what happens to their CPPD pension when they turn 65 years of age. This is one of the reasons why CPPD could end (the other main reasons being a suspension of benefits for a return to work or review of ongoing eligibility). In fact, the vast majority of people exiting the CPPD program are due to reaching the age of 65. At that point, CPPD transitions to CPP Retirement Benefits (CPPR). What’s most important to note is that CPPR always pays less than CPPD – the maximum CPPR payment is $986.67 and the average is $527.96 – the latter amount is about 62% of the average CPPD payment. On top of this, any Children’s Pension will also cease when the disabled parent transitions onto CPPR.

Recently in the news there is thought about extending Old Age Security (OAS) to start at 67 years of age, not 65 years. Many people are staying in the workforce longer, and likely there are other economic factors being considered, such as the amounts being drawn on OAS and potential savings by delaying payment until 67 years of age. What hasn’t been addressed is how this could impact the CPP program. As it stands today, CPPR pays a full pension at the age of 65 years of age. Those who take their pension early are financially penalized with a diminished pension, and those who wait until after 65 years are financially benefited with a larger pension. (For more info on changes to CPP Retirement, see previous blog here.

If the standard age becomes 67 years old, will those taking their pension between the ages of 60 and 67 be penalized? Will the benefit of waiting only apply to those after the age of 67?

There has been little publicized related to this issue and CPPD. Would it be a financial benefit to disabled people if they could stay on CPPD for an extra two years before their disability pension is transitioned (and reduced) to CPPR? Our is it a financial benefit to get off CPPD at 65years and then be eligible for a combination of CPPR and OAS? Considering that many people with disabilities face financial hardship, and the majority of people on CPPD have this as their sole source of income, the opportunity to stay on a higher pension for an extra two years could be a welcome change. Or it could be prolonging financial hardship. Some actual number-crunching would need to be done.

Another parallel topic is Long Term Disability. Virtually every policy is written with an end date of 65 years of age. Might LTD continue until 67 years of age? If this could be the case, many people with disabilities receiving LTD would likely benefit from an extra two years of payment.

It would be nice to see people with disabilities get a financial perk such as a longer payment with a higher pension. How this plays out, and whether people with disabilities will win financially, will be a wait and see.

 

Written by: Pamela Bowes, M.ed