Changes coming for Canada Pension Plan

Canada Pension Plan (CPP) is set to receive some enhancements starting in 2019.
With the changes, in exchange for higher contributions, higher benefits will be received. The enhancements will only affect those who work and make contributions to the CPP.
These changes will bring about an increase in CPP retirement, disability and survivors pensions. However, eligibility will not be affected.
For those who work exclusively in Quebec, they will not be affected by the CPP enhancements as they contribute to the Quebec Pension Plan.
In 2019, the CPP will begin to grow to replace one third of an individual’s average work earnings. The maximum limit used to determine average work earnings will also gradually increase by 14 per cent by 2025.
As a result, pension amounts will increase by more than 33 per cent. One’s pension will increase based on how much and for how long they contribute to the enhanced CPP. They will get the full increase if they contribute to the enhanced CPP for 40 years.
The enhancement also applies to the CPP post-retirement benefit. If one is receiving the CPP (or QPP) retirement pension and they continue to work and make CPP contributions in 2019 or later, their post-retirement benefits will be larger.
There are several changes being made to the CPP, including the fact that those who earn more than $3,500 per year, work everywhere in Canada except Quebec, and are over the age of 18 will contribute to the CPP.
From 2019 to 2023, the contribution rate for employees will gradually increase by one percentage point (from 4.95 per cent to 5.95 per cent) on earnings between $3,500 and the original earnings limit of $55,300 in 2017.
In 2024, employees will begin contributing four per cent 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 per cent higher by 2025 (estimated to be $79,400).
This additional range will only have an affect in years when one’s 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. For those who are self-employed, they will contribute both the employee and employer portions. This means a contribution rate of 11.9 per cent on earnings up to the original earnings limit and eight per cent on the additional earnings range will go towards the CPP. This will in turn increase benefit amounts.
For employees, their CPP contributions will continue to be automatically deducted by their employer. To find out more about CPP enhancement contributions for those who are an employer or are self-employed, visit https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/budget-2016-growing-middle-class/canada-pension-plan-enhancement.html.