Are you self-employed? Here’s what the Canada Pension Plan enhancement means for you

As a self-employed person, you are juggling the unique role of both employer and employee. You need to carefully plan for changes that affect your budget. That’s why it is important for you to know about the Canada Pension Plan (CPP) enhancement.

Starting January 1, 2019, you began investing slightly more in the CPP to help you build a more secure retirement. The enhancement will increase the maximum CPP retirement pension benefit by about 50 per cent, once mature.

To fund enhanced benefits, annual CPP contribution rates will continue to increase modestly over seven years. The gradual increase is designed to help you adjust.

Did you know?

  • On January 1, 2019, your CPP contribution rate increased from 9.9% to 10.2% of your pensionable earnings and on January 1, 2020, it increased from 10.2% to 10.5%.
  • You will be able to deduct the enhanced portion of your CPP contributions when you file your 2019 tax return.
  • If you retire or retired between 2019 and 2021, there will be little to no changes to your CPP benefits. The increased benefits are over the long term. The amount of increase in benefits you receive will depend upon how much and for how long you contribute to the CPP.

What’s new?

Last summer, we held an online public consultation of self-employed individuals. We asked you to tell us what you knew about the CPP enhancement, what you wanted to know and how we could best tell you about it. We received responses from 244 participants. According to that feedback, you said:

  • Many of you are not aware of the CPP enhancement and we need to work harder to tell you about it.
  • You want to know more about how much you will receive when you retire, how the CPP enhancement works, and how much you will have to contribute.
  • You said your three most trusted sources of information on tax-related matters were the CRA web pages on Canada.ca, online tax software, and accounting firms.
  • You prefer products like one-page tip sheets, general web content, booklets/guides (PDF), and e-newsletters.
  • Most of you prefer to receive information by email and through the CRA web pages on Canada.ca.

We will use these findings to deliver communications products that will help you better understand the CPP enhancement. For more information on our findings and how we will apply them, see the Canada Pension Plan Enhancement Consultation with Self-Employed Individuals – Part One.

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