Proposed Changes to CPP

Currently, workers and employers in Canada pay 4.95% of salaries into the CPP, up to a maximum income level of $55,300 a year. When people retire at the age of 65, they are paid a maximum annual pension of $13,370 under the program. People earning more than $54,900 do not contribute to CPP above that level, and do not earn any additional pension benefit.

The first major change under the new CPP regime will see an increase to the CPP retirement benefit to 33% from the now 25%, which will be phased-in starting in 2019 and fully implemented by 2024. The increase in benefits does however result in increased contributions from Canadian employees, employers, and by self-employed individuals.

The second major change increases the maximum annual pensionable earnings amount from $55,300 to about $82,700 by the time the program is fully phased in by 2025. This ultimately allows higher-income workers to be eligible to earn CPP benefits on a larger portion of their income.

This means that if an employee’s earnings for 2025 are at or above the projected upper earnings limit of $82,700, then the employee contributions for 2025 will be the maximum total of $4,513, versus the current maximum of $2,564.10 based on the maximum earnings amount of $55,300.

Canadians who will be the primary beneficiaries under the new program are those who are unable to benefit from workplace pension plans. To earn the full CPP enhancement, a person needs to contribute for 40 years at the new levels once the program is fully phased in by 2025.

If you have any questions, or for more information, please do not hesitate to contact your HGA representative.

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