Almost all pension planning articles seem based on the assumption that both partners in a relationship, married or common law, will live to an incredibly old age, happily or not. That’s not reality, however. In fact, according to 52 Ways to Wreck Your Retirement: …And How to Rescue It “the average age for widowhood in Canada is 56.”
56.
I never would have guessed that number and I doubt many others would have either.
For those who lose their partner before 65 this could make a huge difference to their financial future. Instead of two people living together pooling their pensions and resources for many years there will be only one. And perhaps more distressingly, if the person dies young, there may be a number of years lost when it was expected they would boost their RRSP savings and pension earnings. Many people don’t really save significant amounts until they are in their fifties. Most Defined Benefit pensions are calculated based on the number of years of service and the highest earning years: both of which will probably be reduced if a person dies young.
Others may lose their partner almost immediately after retirement. One of our closest relatives was diagnosed with a fatal illness at 64 and was gone by 67. Her husband lived another 11 years without her. While the death of a partner just after retirement may not reduce planned savings or pension entitlements, it can still have a severe impact on the surviving partner’s income.
CPP Is Not Directly Payable to a Surviving Spouse
Many people haven’t given much thought to how CPP works. When they estimate their retirement income, they simply add the expected CPP payment for both spouses. But when one spouse dies, the other is only entitled to CPP Survivor Benefits, not the deceased person’s full CPP payment.
The combined CPP payment to any person is limited to the maximum CPP monthly payment based on the maximum that second person was entitled to when they retired. (The monthly maximum is adjusted frequently but only applies to people who are just beginning to get CPP. For someone already receiving CPP their monthly maximum was set the day they started receiving CPP and is only increased by an inflation adjustment. So the maximum is based on the maximum at the time the second person in the couple retired.)
Imagine a man retires and begins receiving the maximum personal CPP monthly payment. Unfortunately, soon after his wife, who began receiving CPP before him, dies. The husband will not get ANY additional CPP! There is a death benefit of up to $2500 to help defray some of the costs of the funeral but that is all. And that benefit is fully taxable as income to the recipient or to the estate, so in reality it may be worth $2000 or less after tax.
In another case, imagine a woman retires and begins receiving one third of the maximum CPP monthly payment. Her husband retires after her and receives the maximum CPP monthly payment. If he dies, she will begin to receive at MOST the maximum CPP monthly payment only. She will not receive his maximum plus her one third. She will receive 60% of his payment plus her payment, up to a maximum of his maximum CPP monthly payment. Her CPP income will likely only be about 75% or less of what their joint CPP income used to be.
The Toronto Star recently reported on this issue. In their article they interviewed a man who was surprised to discover that when his wife died, his own CPP payment only increased by $22.75, even though his wife’s CPP monthly payment had been $1053.
For CPP planning, it’s probably best to estimate your survivor benefits as conservatively as possible. In general, you should assume you would only receive 60% of what your partner was receiving, added to your own CPP payment, but capped at a maximum value of 100% of what your maximum monthly CPP payment is or will be. If that’s too complicated, assume you will get nothing from CPP if your spouse dies. It’s better to plan on receiving too little money than too much.
Defined Benefit Pension Plan Benefits May Also Be Lost
Most defined benefit pension plans also limit the amount paid to a surviving spouse or partner. A common amount is 60% of the original payment. However the actual amount can range from 0 to 100%.
The only way to know what you might receive from your partner’s DB pension is to look it up. In fact, you may even have to check it annually as the terms of the plan may change from year to year.
I know when a friend took early retirement, not really be choice, the friend was asked to choose what percentage of their pension would go to their spouse if they died. If they chose 60%, the monthly amount they would receive before death would be significantly lower than if they chose 0%. This friend was then left trying to decide who was more likely to die first! That’s a terrible decision to have to make and a dangerous one as many of us don’t have any way of knowing what the future holds.
Defined Contribution Pension Plan Benefits Vary for Survivors
Defined contribution pension plans have varying rules if a person dies before retirement. Some simply turn over the entire account to the surviving spouse as a locked-in RRSP-type of investment. Others give the survivor 60% of the value of the plan. There is no “one” answer. Again, you would have to check the rules for the specific plan your partner or spouse is enrolled in.
DC pensions also have different rules for what happens if a person dies after they retire. You will have to check these rules with whomever administers the plan. Some DC pensions, for instance, are used to buy an annuity type of product when the person retires. The terms of the annuity may include a guaranteed minimum number of payments with the beneficiary getting any payments the pensioner does not receive; other annuities give a percentage of the monthly payment to a survivor; others give nothing after the pensioner dies.
The Rules for Survivors of Group RRSP Pension Earners Also Vary
As with DC pensions, group RRSP pensions have different rules depending on the company setting up and administering the plan. You have to check the terms of your pension or your spouse’s pension with the administrators. Don’t assume you will automatically inherit the same pension funds or pension payments as the pensioner received!
Checking Survivor Pension Entitlements is a Key Step in Pension Planning
The frequent use of the words “may, possible, probably, often” and so on in this article should point out clearly that there is no standard answer for what pension you will receive if your spouse or partner dies. It’s critical for proper pension planning to check the details of the specific pension plans your partner participates in.
You can review the CPP rules at Survivor Benefits, and Canada Pension Plan Survivor Benefits.
The conclusion of your review may very well be that you should not rely on receiving much or anything from your partner’s pensions if he or she dies first. If you don’t think you can survive on only your own pensions and savings, it may be time to try to improve the value of those.
Related Reading
- Early Retirement: It Could Happen to You
- Times When It’s Worth Having an RRSP Even if Your Spouse has a GREAT DB Pension Plan
- How to Apply for CPP Survivor Benefits
Join In
Do you find it shocking that if your spouse dies you could receive none of their CPP monthly payment? Do you know if you would get anything from your spouse’s work pension/s if he or she died? Please share your experiences with a comment.
Life insurance is super critical for bridging the gap, even for folks with a defined benefit pension. The survivor pension is rarely much unless the person has a few decades of service.
That certainly is one option worth pursuing.
My wife and I (both over 90) receive the CCP split between us. How much will my wife receive after I die?
The calculation of “survivor benefits” is complicated so I would strongly suggest if you need to know that you contact Service Canada and ask them to tell you the amount. Their number is 1-800-277-9914
The survivor’s pension is at most the same as the maximum CPP that one person could receive.
If there is little or no other income than CPP or OAS, then the survivor may also be eligible for some GIS to bring their income up to the legal minimum.
Service Canada should be able to give an estimate of the amount based on your own personal circumstances.
Hi there what is GIS??
The Guaranteed Income Supplement is a monthly payment made if a person is receiving Old Age Security (OAS) and has an income below a maximum level. So it is only for people aged 65 and up. They have to have lived in Canada for a certain length of time, not still be a sponsored immigrant, and so on. You can read more details on the government website at:
https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/guaranteed-income-supplement.html
I lost my husband at 53 to cancer, he wirked over25 years on the rigs. I get a small widows pension. How should I applyfir cpp. I am 60 right away
I’m sorry to hear of your loss.
I suggest you contact Service Canada and ask them to tell you ALL the details about your CPP survivor’s pension and your own CPP (if you worked and paid into the CPP program) BEFORE you apply. It’s possible that it may be better to wait until you are 65 to apply for CPP. I don’t know whether your benefits will stay the same, increase or DROP if you apply before then. Please talk to them and get the details.
http://www.esdc.gc.ca/en/cpp/index.page has general info
http://www.esdc.gc.ca/en/esdc/contact/cpp.page?_ga=1.65888618.518665135.1474930112 has the info about contacting them about CPP including writing them to get an estimate of your CPP
If you have a very low income and your husband was working and living in Canada for the 25+ years, you may also be eligible for the Allowance for the Survivor from your age 60 to 65. http://www.esdc.gc.ca/en/cpp/oas/allowance_survivor.page
It’s meant to help provide a small increase in income until the regular OAS becomes available when you turn 65.
I don’t work for the government so I’m sorry but that’s the only information I can provide. I hope this helps a bit.
Hi im not sure if this is the proper place to ask these questions my apologies if its not but im in a terrible situation and would appreciate ANY advice or help to point me in the right direction!!!
So i was married in 1999 separated in 2006 he applied for divorce and it was finalized on February 9th 2009 i applied for his CPP and from what i could understand they said when i turn 65 I’d get approximately a 100.00 per month. Anyways iam only 47 now and iam unable to work due to medical reasons hip replacement,back surgery, osteoarthritis,degenerative disc and joint disease ect ect. Plus im also caring for my severely handicapped 7 yr old granddaughter. I have no income at all other that her CTB and all CRA gives me is $218.00 a month for her disability benefit!!! I’ve applied for income support benefits and they have denied my for the reason iam still residing in the home of my ex common law partner a relationship that started a few years after my husband passed away. But i reside here because i need his HELP with our granddaughter. This is actually his biological granddaughter as well because when we met he had children from a previous marriage and so did i so his son and my daughter had a short relationship and she got pregnant so boom here iam. But since them our relationship broke down so we remain friends and still reside under the same roof for the sake of our granddaughter and meeting her NEEDS and giving her the best chance in life we possibly can!!!! So after all has been SAID i have NO INCOME and the government will NOT HELP ME!!!!! Im living in poverty trying to raise my beautiful granddaughter and i feel this is very UNFAIR YES its a unique situation but DO i NOT deserve to have ANY INCOME because im trying to fo whats right and i need my ex’s HELP like bathing her ect she’s a 2 person lift shes ALMOST 8 YEARS OLD she’s still in diapers pureed foods does NOT walk does NOT talk and is in a wheelchair!!! And that is the ONLY equipment i have for her!!! Its a brutal UNFAIR unique situation PLEASE HELP ANY advice would be appreciated.
I’m very sorry to hear of your situation. It sounds incredibly difficult. Unfortunately, I don’t work for the government or any social agency. I’m just a working taxpayer like you would be if you could be. I’m not aware of any other benefits you can apply for as it sounds like you have already tried to get provincial disability and welfare support. I’m so sorry but I don’t have any advice.
Thank you very much!!! Yes its a terrible situation and so unfair!!!
My husband was divorced in 2011, they had a split pension agreement. His ex-wife passed away in December 2016 and he pulled his early CPP pension when he turned 60 in November of 2017.
Knowing he would not receive his ex-wife’s portion of the split pension he applied to CPP to regain his part of the split pension. He received his response by letter stating that a split cannot be reversed and he not only looses her portion he also looses his that would have been directed to her. Where does this money go? Why is there no clear links for people to find these answers? I cannot find any link what so ever that informs people of this through CPP.
Hello, I’m very sorry to hear of your husband’s problems with CPP. As you know, I don’t work for or with the government, I’m just a taxpayer too.
The CPP process seems very complicated to me. I know that if I pass away, my husband will get almost no increase (maybe $5) in his CPP because he is already eligible to receive almost the max. But if he passes away, I will receive a few hundred $$ (not his entire amount though!) because my CPP is very very low. It doesn’t seem right but those are the rules. They use them to boost everyone’s CPP payments a bit by using any “extra” money left when someone dies young to help pay those who are still alive, instead of just raising the CPP premiums for taxpayers.
I doubt the information you needed is posted online, until this comment! The only way to get info like that is usually to telephone Service Canada.
I’m sorry this reply is so slow. And thank you for sharing this information with readers.