Who doesn’t want to increase their Canada Pension Plan (CPP) pension? The Government of Canada website explains that the amount of your CPP retirement pension depends on a number of factors:
- The age you decide to start your pension
- How much and for how long you contributed to the CPP
- Your average earnings throughout your working life
It continued that “For 2023, the maximum monthly amount you could receive if you start your pension at age 65 is $1,306.57. [However,] the average monthly amount paid for a new retirement pension (at age 65) in June 2023 was [only] $772.71.”
Replace periods of low to no earnings
Your CPP pension is calculated using your best 40 years of earnings. If you continue to work after age 65 and before age 70, you may be able to use these earnings to replace any periods of low earnings before age 65. “When we calculate the base component of your CPP retirement pension, we will ‘drop out’ or not include up to eight years of your lowest earnings from your earnings history. This will increase the amount of your pension.” For example, periods of low to no earnings may include times when you were raising children or had temporary disability.
Contribute the maximum amount to the CPP
CanadaLife.com explains, “To receive the maximum CPP amount, you must contribute to the CPP for at least 39 of the 47 years from ages 18 to 65. You must also contribute the maximum amount to the CPP for at least 39 years based on the yearly maximum pensionable earnings (YMPE) set by the Canada Revenue Agency.”
As an example, the table below lists the YMPE in their respective years.
| Year | Yearly Maximum Pensionable Earnings |
| 2023 | $66,600 |
| 2022 | $64,900 |
| 2021 | $61,600 |
| 2020 | $58,700 |
| 2019 | $57,400 |
Notably, the Government of Canada website defines the “total pensionable income [as] the sum of the employee’s gross pay including any taxable benefits and allowances the employee received in the pay period that requires CPP deductions.”
Increase your personal pension
For Canadians who have worked less than 40 years here or earned less than the YMPE in some or all years, not all is lost. You can put it in your own hands to increase your personal pension! After all, your savings are a key part of your retirement. Take advantage of tax-advantaged accounts like the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP)/Registered Retirement Income Fund.
Higher interest rates since 2022 have triggered lower stock prices. Retirees can very well park their long-term capital in solid dividend stocks that pay safe dividends.
For example, retirees can opportunistically buy Toronto-Dominion Bank (TSX:TD) on dips. Currently, the quality North American bank offers a dividend yield of just under 5%. The retail banking-focused business has reported solid earnings through the economic cycle. It also tends to increase its dividend in the long run. For your reference, its five-year dividend-growth rate is 8.7%.
In the near term, higher loan-loss provisions and slower economic growth will weigh on the stock and its earnings. TD Bank has the cushion to protect its dividend and increase its dividend over time.
Be ready that the regulator could ask the bank (and its peers) to freeze their dividends in times of heightened risk in the economy, such as during a recession. For example, around the 2020 pandemic, TD Bank maintained the same quarterly dividend for seven quarters versus its usual schedule of increasing its dividend every four quarters or so.
