Starting in 2019, a number of changes to the Canadian Pension Plan (CPP) will take effect. These changes, originally announced in June 2016, will gradually increase the contribution rate for employees by 1% from 2019 to 2023.
Some other highlights of the new legislation can be found below:
If you have pension earnings between $3,500 and the original earnings limit, the following chart will help to illustrate these ratings increases and when they take effect:
Note: If you’ve already started receiving pension benefits, these changes will not apply to you.
Beginning in 2019, pension benefits will gradually start to increase in amount as well. Refer to the following chart to reference the change in your monthly age-65 pension payments, and when these increases take effect:
Another key change to the CPP starting in 2024 is a higher ceiling for earnings on which contributions will be required, called your Yearly Additional Maximum Pensionable Earnings, or YAMPE. Phased in over two years (a 7% increase in 2024 and a 14% increase in 2025), to an estimated maximum of $61,400 and $65,400, respectively.
These earnings will then be known as second additional pensionable earnings, and will combine with the original Year's Maximum Pensionable Earnings (YMPE), to form a total contribution rate of 8% (4% employer contribution + 4% employee contribution).
In addition to the rest of the CPP changes in 2016, two amendments or “drop-in provisions” were added to the tax legislation in 2018 as well. These additions are as follows:
- If you have no pensionable earnings due to child rearing (for a child up to age 7), you will be able to drop-in earnings instead, calculated as an average of your earnings in the 5 years before the birth of your child.
- If you have no pensionable earnings because you were eligible for a CPP Disability pension, you will be able to drop-in earnings as well, calculated as an average of 70% of your earning in the 6 years prior to the onset of your disability.