Pension plans are essential for everyone. There are a few things that you should know when it comes to understanding the Canadian pension plan.
The Canadian Pension Plan, or the CPP is the government pension plan which is useful for the individuals who are aged 60 and above. They should also be those who have made their own contributions to this plan whenever they were either employed or they were running a business.
Here are a few more things that you need to know about the Canadian Pension plan.
If you are worried whether you are eligible for CPP when you’re self employed, there’s no need to worry. The Canadian Pension Plan allows self employed to create and manage their own pension fund. In addition, there are other benefits you get as a self employed individual under the Canadian Pension plan are that you have the freedom to purchase any other retirement income investments.
You should also be aware that the lower income floor is set to $3500, while the upper amount is changed annually. Currently, it is about $54,900. The rate for the contributions is set at 9.9% by the Canadian Pension plan. In case you are a self employer, it is your whole and sole responsibility for the entire contribution. However, for employees and employers, the contribution is divided evenly.
According to the Canadian Pension Plan, the contributions for those who are self employed depend on the net income of the business. In this case, the income from the other sources do not count in the contribution.
Now a question arises on how do you find your contributions.
The Canadian Pension plan keeps the contributions filed in a statement which is the record of your overall earnings as pensions, plus your contributions. When you are calculating the retirement earnings from the Canadian Pension plan, this record or the statement can act as your base for the calculations. In case if you are looking for a hard copy of the record, ATS Accounting can be of great help to you.
The interesting point in the Canadian Pension plan is that the years when you were earning low are deducted from the calculations. This keeps your pensionable earnings at a higher value. Also the years that you spent in raising your children till 7 years of his/her age are also exempted. This is done under the child rearing policy.
In all, if you meet with all these requirements, then you are eligible for these provisions that are available to you regardless of you being a self employed person.
The above points are some guidelines that can help you understand the Canadian Pension plan. But it might be a bit difficult for you to understand the inner aspects. ATS Accounting can be of great help when you want to know about Canadian Pension plan.