Effective January 1, 2019, contributions and benefits under CPP will both be increased.
The contribution increase will be phased in over seven years. Effective January 1, 2019, the contribution rate on earnings below the Year’s Maximum Pensionable Earnings (YPME) will gradually increase over the next five years, from 4.95% to 5.95%.
In addition, effective 2024, employers and employees will begin contributing an additional 4% each on an additional range of earnings. This range will start at the original earnings limit (expected to be $69,700 in 2025) and go to the additional earnings limit (expected to be $79,400 in 2025).
If you are self employed, you will contribute the employee and employer portions, paying a rate of 11.9% on earnings up to the original limit plus an additional 8% on the additional earnings range.
These contribution changes will increase the income replacement under CPP as well. Income replacement under CPP will increase from ¼ to 1/3. Your pension will increase based on how much and for how long you contribute to the enhanced CPP. Someone who contributes to the enhanced CPP for 40 years will get the full increase.
If you have any questions about how these changes may impact you or your business, reach out to your Bateman MacKay account manager.