Over years of employment, your employees will build up a monetary fund which they’ll receive when they choose to retire. This fund is known globally as a pension.
It’s a legal requirement to make contributions to this employee benefit if you’re an employer. There is also an option for an employee to make contributions during their working life.
In this guide, we’ll discuss what pensions are, how they work and what needs to be done to receive one.
What is a pension?
A pension is a retirement plan which provides an income via monthly pension payments.
Money is paid into a pension on a monthly basis from someone’s salary, with the amount based upon the following three factors:
- The amount of time employed by a company.
- The age of the employee.
- The salary the employee is earning.
How do pensions work in Canada?
There are two types of pension which your employees could receive in Canada:
- An employer pension plan: Both employee and employer contribute a percentage of their salary. This combined amount makes for a higher income post retirement. The more salary someone earns, the more pension they will receive.
- Canada Pension Plan (CPP): This is when just the employee makes contributions to their overall retirement income. The CPP is the most popular form of pension to receive in Canada.
What is the Canadian Pension Plan?
This pension plan is taxable benefit that replaces part of an employees’ income when they retire.
Not everyone qualifies to receive this benefit, but upon qualification – this pension is received for the rest of their life.
To qualify, you must be:
- At least 60 years of age.
- Have made one valid monthly contribution to your CPP.
How to apply for Canada Pension Plan?
The CPP isn’t an automatic given for Canadians, you need to encourage your employees to apply before they retire. The applications can take up to two weeks if made online via the Government website.
How much is the Canada Pension plan?
There is no set amount to what your staff may receive as part of their CPP. As per the Government website, the maximum amount is $1203.75. What an individual employee may receive depends on their past employment situation.
For example, any periods out of work or raising children will increase the amount received.
To work out how much an individual employee will receive upon retirement, they can use the Canada Pension Plan calculator.
They must have access to any financial information regarding their past employments.
Any statements which specify ongoing monthly retirement incomes.
When do you receive your pension?
The Canada pension dates vary each year, although they are usually at the end of each month. For more information visit the Canada Government website.
Can you receive a pension and still work?
There’s nothing in law that prevents staff working whilst also receiving a pension.
However, they must have terminated previous employment to start receiving any money.
You need to make sure your employees are aware of this before commencing with their pension.
Get help your employee pensions today with BrightHR
Your employee’s have a right to a pension when they retire from work. You must ensure you help your employees in receiving a pension or contributing to it.
Our HR Document Storage will help you to manage document your employees progress with their pension for when they come to retire.
Contact us on 18882204924 or book a demo today.