The Canada Pension Plan Enhancement
As of January 1st 2019, Canadian workers will contribute more to the Canada Pension Plan (CPP). This new change affects all workers in Canada except Quebec and plans to increase the maximum retirement pension by about 50% by 2024.
Who contributes to CPP?
Any workers in Canada except Quebec over the age of 18 and who earn more than $3,500 per year must contribute to the CPP. Contributions are also made for you by your employer each pay period. The amount you contribute is based on your gross income for the year, the CPP earnings ceiling (which is set by the government), the CPP minimum exemption amount and the contribution rate. The formula is as follows:
(Annual income – CPP minimum exemption) * contribution rate
If your annual income is more than the CPP earnings ceiling, the earnings ceiling is used instead for the calculation.
2019 – 2023
Starting on January 1st 2019, the contribution rate increased from 4.95% to 5.1% and the earnings ceiling increased from $55,900 to $57,400. By 2023, the contribution rate is expected to gradually rise to 5.95% and the ceiling will increase to $65,700.
Beginning in 2024 a second earnings ceiling will be added and will be set higher than the first. The difference between the two will be subject to a 4% contribution rate and will be added to your current contribution limit.
For an overview of the new changes, visit: