Canada Pension Plan enhancement
As of 2019, the Canada Pension Plan (CPP) is gradually being enhanced. This means that today’s workers, the seniors of tomorrow, will have higher benefits and greater financial stability through a small increase in the amount they contribute to the CPP.
The CPP enhancement only affects those who work and contribute to the CPP in 2019 or after.
The enhancement adds 2 additional components to the CPP. These components are not a separate benefit, but a ‘top-up’ to the base CPP.
The CPP now consists of:
- the base (or original CPP)
- the first additional component, which was phased in between 2019 and 2023, and
- the second additional component, which will be phased in between 2024 and 2025
The CPP enhancement will increase the amount working Canadians receive in the CPP retirement pension, post-retirement benefit, disability pension and survivor's pension. It will not affect eligibility for CPP benefits.
To find out if you qualify for CPP benefits, visit:
If you only work in Quebec, you contribute to the Quebec Pension Plan (QPP), a similar enhancement to the QPP may affect you.
We determine the higher benefit payment on how much and for how long you contribute to the CPP enhancement.
If you applied after January 1, 2019, you can expect to have the enhanced amount included as part of your monthly CPP benefit. If you are eligible, this may also include a small, retroactive amount from the disability drop-in provision and/or the child-rearing drop-in provision.
If you have questions once you receive your payment, you can:
Effects on the CPP retirement pension and post-retirement benefit
Up until 2019, the CPP retirement pension replaced one quarter (25%) of your average work earnings. We determine this average on your earnings from employment or self-employment up to the maximum earnings limit in 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 (33.33%) of the average work earnings you receive after 2019. The maximum limit of earnings protected by the CPP will also increase by 14% between 2024 and 2025.
Your pension will increase based on how much and for how long you contribute to the enhanced CPP. The CPP enhancement will increase the maximum CPP retirement pension by more than 50% for those who make enhanced contributions for 40 years.
The enhancement also applies to the CPP post-retirement benefit. It will be higher if you:
- are receiving the CPP (or QPP) retirement pension, and
- continue to work and make CPP contributions in 2019 or later
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, the enhancement will not affect it.
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, the enhancement will not affect it.
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. This is adjusted each year based on changes in the average wage in Canada. For the current year, this limit is $66,600 (2023).
Before January 1, 2019, employees contributed 4.95% on these earnings to the CPP. Employers contributed an equal amount. If you are self-employed, you contributed both the employee and employer portions, which was equal to 9.9%.
The increase in the amount that employees and employers contribute is being phased in gradually over 7 years in 2 steps:
Step 1 (2019 to 2023): first additional component
Between 2019 and 2023, the contribution rate for employees was phased in by 1 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): second additional component
Starting in 2024, a second, higher earnings limit will be introduced. This will allow the CPP to protect a higher portion of your earnings. This new limit, known as the year’s additional maximum pensionable earnings, will not replace the original limit, known as the year’s maximum pensionable earnings. Rather, it creates 2 different ranges of earnings that are protected by CPP:
- the original range, which goes to the original limit, and
- an additional range for earnings between the original limit and the new one
This additional range of earnings covered by the CPP will start at:
- the original earnings limit (projected to be $71,200 in 2025)
And go to:
- the new earnings limit which will be 14% higher in 2025 and after (projected to be $81,100 in 2025)
Like the original earnings limit, the new limit 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 original earnings limit.
So, if you earn more, the CPP will protect those earnings. By making a higher contribution, you will get a higher future benefit amount.
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, self-employed individuals will pay:
- a contribution rate of 11.9% on earnings in the original earnings limit, and
- 8% on the additional range (for example, between the original earnings limit and the new one)
This will in turn increase your benefit amounts.
If you are an employee, your employer will continue to deduct CPP contributions. 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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