Danielle Arbuckle, Freelance Writer at AOL Canada, Dec 3rd, 2011

In May 2010, the federal government announced changes to the Canada Pension Plan (CPP), which will be phased in from 2011 to 2016. While most of the announced changes will be implemented in 2012, the first phase has already started. If you'll be retiring in the next few years, here's what you need to know.

If you retire after age 65

The big change for 2011 is an increased incentive for delaying retirement beyond age 65 up to age 70. If you decide to work past age 65 and delay your CPP benefits until the end of 2011, you'll get an additional 6.84 percent (or 0.57 percent for each month you delay). This incentive will steadily increase until 2013, when you'll receive an additional 8.4 percent for each year you choose to wait. Under the old rules, you would have received and extra 6 percent per year. In other words, once the rule is fully implemented, if you retire at 70, your CPP benefits will be 42 percent higher than if you had retired at 65 (instead of 30 percent higher under the old rules).

If you retire before age 65

The new rules discourage early retirement by cutting your pension by 7.2 percent for each year in retirement before age 65 by 2016. Starting in 2012, the decrease per year will be 6.24 percent. Under the old rules, your pension would have been cut by 6 percent. So, once the rule is fully implemented, if you retire at 60, which is the earliest you can collect CPP benefits, your monthly benefit will be cut by 36 percent (instead of 30 percent under the old rules).

Collecting CPP while you're still employed

As of 2012, you may choose to collect CPP while you're still working, in the hopes that you'll use your CPP benefits to supplement your income or to help you ease into retirement. Under the old rules, this wasn't an option.

If you go back to work

Under the old rules, once you received CPP benefits, you couldn't make any more contributions. But as of 2012, if you're between 65 and 70, still working (or back to work), and collecting CPP, you'll have the option to continue your CPP contributions. Your employer will also be obligated to contribute. The federal government hopes this change will allow you to benefit from higher CPP payments when you retire completely.

If you've already retired and are collecting CPP, none of these changes will affect you unless you return to work. For more information, visit the Service Canada website, and visit the Canadian Retirement Income Calculator while you're there.

What are the changes being made to the CPP?

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