Does the CPP factor in recent contributions?

In recent years, the government hasn’t been prompt in updating your information

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From the Summer 2016 issue of the magazine.

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We rely on the government to calculate our CPP pensions accurately, and usually they do that. But if you’ve started a CPP pension in the last few years, it may have been slow to update your pension to reflect your last year or so of contributions made before retiring.

Doug Runchey, an expert at DRpensions.ca who provides consulting services for CPP beneficiaries, says he has conducted about 55 audits of CPP benefit calculations for recipients in the last three years. He found the payout on recently started benefits was short in about half the cases, due to delayed or missed inputs of contribution and income data from just prior to retirement. He said the underpayments are often just a few dollars, but the largest was $968.

Read: When to tap into your retirement benefits

Here’s why the updates are necessary. Your CPP pension calculated by Service Canada is based on income and contribution data derived from your tax filings with the Canada Revenue Agency (CRA), which is available after a lag. If you, say, retired and started your CPP pension in February of 2015, Service Canada probably wouldn’t yet have your employment income data from 2014 and early 2015. Based on recent practices, Service Canada would be able to catch up with a retroactive adjustment in the fall of 2015 to account for the updated 2014 data filed with your latest tax return, says Runchey. The catch-up for 2015 contributions might have to wait for later.

But in recent years the government hasn’t always been prompt with the recalculations. A spokesperson for Employment and Social Development Canada wrote in an email that there was a backlog of overdue recalculations that was addressed in 2014. More recently, many recalculations for 2014 contributions were not done until early 2016, with a “small percentage” remaining to be done by early May but expected within a few weeks, the spokesperson wrote.

Think your CPP pension inputs need updating? The spokesperson advises you to ask Services Canada for a detailed letter explaining your CPP pension calculation. The letter should state which years of income and contributions are incorporated, so you should be able to tell if any input years are missing and then be armed with the information to have those addressed.

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