Canada Pension Plan enhancement
Starting in 2019, the Canada Pension Plan (CPP) contribution has gradually been increasing. The enhancement works as a top-up to the base, or original CPP, and will mean higher benefits in retirement in exchange for making higher CPP contributions. The CPP enhancement will only affect you if you work and make contributions to the CPP as of January 1, 2019.
The enhancement increases the CPP retirement pension, post-retirement benefit, disability pension and survivor’s pension you may receive. Eligibility for CPP benefits is not 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. You may be affected by the similar enhancement to the QPP.
If you are currently in receipt of a CPP benefit and have contributed to the CPP enhancement, you can expect to receive your first enhanced payment, including any retroactive amounts owing, before the end of November 2022. The increase in payment is based on how much and for how long you contributed to the CPP enhancement.
If you have questions once you receive your payment, you can:
Effects on CPP retirement pension and post-retirement benefit
Up until 2019, the CPP retirement pension replaced 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.
The enhancement means that the CPP will begin to grow to replace one third of the average work earnings you receive after 2019. The maximum limit used to determine your average work earnings will also gradually increase by 14% by 2025.
Your pension will increase based on how much and for how long you contribute to the enhanced CPP. The CPP enhancements will increase the maximum CPP retirement pension by up to 50% for those who make enhanced contributions 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 higher.
Effects on CPP disability pension
The enhancement will also increase the CPP disability pension starting in 2019. The increase you receive will depend on how much and for how long you contribute to the enhanced CPP. If you began receiving your CPP disability pension before 2019, it will not be affected by the enhancement.
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. If you began receiving your survivor’s pension before 2019, it will not be affected by the enhancement.
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 an annual earnings limit (adjusted each year based on changes in the average wage in Canada). For the current year, this limit is $64,900 (2022).
Before January 1, 2019, employees contributed 4.95% on these earnings to the CPP. Employers made an equal contribution. If you are self-employed, you contributed both the employee and employer portions, which was equal to 9.9%.
The increase in contributions as a result of the enhancement will be phased in gradually over 7 years in 2 steps:
Step 1: 2019 to 2023
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.
|Year||Employee/employer increase||Self-employed increase||Employer/Employee rate||Self-employed rate|
Step 2: 2024 to 2025
Starting in 2024, a second, higher limit will be introduced, allowing you to invest an additional portion of your earnings to the CPP. This new limit, known as the year’s additional maximum pensionable earnings, will not replace the first earnings ceiling. Instead, it will subject your earnings to 2 earnings limits. This limit is referred to as the second earnings ceiling.
This new range of earnings covered by the Plan will start at the first earnings ceiling (estimated to be $69,700 in 2025) and go to the second earnings ceiling which will be 14% higher by 2025 (estimated to be $79,400). Like the first earnings ceiling, the second will increase each year to reflect wage growth.
Note: This additional range will only affect you in years when your annual earnings are above the first earnings ceiling.
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 once the phase-in is complete you will pay a contribution rate of 11.9% on earnings up to the first earnings ceiling and 8% on the second earnings ceiling. 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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