Canada Pension Plan enhancement
Starting in 2019, the Canada Pension Plan (CPP) will be gradually enhanced. This means you will receive higher benefits in exchange for making higher contributions. The CPP enhancement will only affect you if, as of 2019, you work and make contributions to the CPP.
The enhancement will increase CPP retirement, disability and survivor’s pensions you may receive. Eligibility for CPP benefits will not be affected. For more information about eligibility for CPP benefits, visit:
If you only work in Quebec, you contribute to the Quebec Pension Plan (QPP) and the CPP enhancement does not affect you.
Effects on CPP retirement pension and post-retirement benefit
Up until 2019, the CPP retirement pension replaces one quarter of your average work earnings. This average is based on your work earnings, up to a maximum earnings limit each year. Other sources of income—such as the Old Age Security program, workplace pensions and private savings—make up the rest of your retirement income.
In 2019, the CPP will begin to grow to replace one third of your average work earnings. The maximum limit used to determine your average work earnings will also gradually increase by 14% by 2025.
As a result, pension amounts will increase by more than 33%. Your pension will increase based on how much and for how long you contribute to the enhanced CPP. You will get the full increase if you contribute to the enhanced CPP for 40 years.
The enhancement also applies to the CPP post-retirement benefit. If you are receiving the CPP (or QPP) retirement pension and you continue to work and make CPP contributions in 2019 or later, your post-retirement benefits will be larger.
Effects on CPP disability benefit
The enhancement will also increase the CPP disability benefit starting in 2019. The increase you receive will depend on how much and for how long you contribute to the enhanced CPP.
Effects on CPP survivor's pension
The enhancement will also increase the CPP survivor's pension, starting in 2019. The increase you receive will depend on how much and for how long your deceased spouse or common-law partner contributed to the enhanced CPP.
Changes to CPP contributions
You contribute to the CPP if you are over the age of 18, work in Canada (outside of Quebec) and earn more than $3,500 a year.
You only contribute on employment earnings between $3,500 and the annual earnings limit (which is adjusted each year based on changes in the average wage in Canada). In 2017 this limit is $55,300.
Currently, employees contribute 4.95% on these earnings to the CPP. Employers make an equal contribution. If you are self-employed, you contribute both the employee and employer portions, which is equal to 9.9%.
From 2019 to 2023, the contribution rate for employees will gradually increase by one percentage point (from 4.95% to 5.95%) on earnings between $3,500 and the original earnings limit.
In 2024, employees will begin contributing 4% on an additional range of earnings. This range will start at the original earnings limit (estimated to be $69,700 in 2025) and go to the additional earnings limit, which will be 14% higher by 2025 (estimated to be $79,400).
Note: This additional range will only affect you in years when your annual earnings are above the original earnings limit.
So, if you earn more, you will contribute more towards your CPP benefits for the future.
Employers will pay the same increase in contributions as their employees. If you are self-employed, you will contribute both the employee and employer portions. This means you will pay a contribution rate of 11.9% on earnings up to the original earnings limit and 8% on the additional earnings range. This will in turn increase your benefit amounts.
If you are an employee, your CPP contributions will continue to be automatically deducted by your employer. If you are an employer or self-employed, you can find out more about CPP enhancement contributions by visiting the Canada Revenue Agency website.
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