Canada Pension Plan Enhancement (2nd Contribution Rate/Earnings Ceiling- January 2024)
The Canada Pension Plan (CPP) enhancement, which was introduced on January 1, 2019, is designed to help increase retirement income for working Canadians and their families.
The CPP is a mandatory pension plan financed by contributions from employees, employers, and self-employed individuals. It covers virtually all workers in Canada except Quebec, which administers its own plan called the Quebec Pension Plan (QPP). The CPP replaces a basic level of earnings for contributors upon retirement, disability, or death.
Once mature, the CPP enhancement will increase the maximum CPP retirement pension by about 50%. It will also increase the survivor and disability pensions.
Enhancing the CPP will significantly reduce the number of Canadian families at risk of not saving enough for retirement, particularly those who do not have a workplace pension plan.
How will the CPP enhancement affect you
- In 2019, annual CPP contribution rates began to rise modestly and continue to do so for seven years. For example, if you earn $55,000 per year, you will contribute about $128.75 more in 2023 than in 2022.
- How much your CPP benefits increase will depend on how much and for how long you contributed to the enhancement. Canadians just entering the workforce will see the largest increase in CPP benefits. Employees who are near the end of their working life will see a small increase.
- The CPP enhancement will benefit you only if you have worked and contributed in 2019 or later. If you are retired, not working, and not making contributions to the CPP, nothing will change and your CPP benefits will not increase.
- The CPP enhancement began on January 1, 2019 as a gradual increase to the CPP contribution rate. Increases have occurred every year on January 1st for five years with the last being on January 1, 2023. A second CPP contribution rate and earnings ceiling will take effect in 2024. It will only affect those whose income is above a designated threshold.
For further details visit: Government of Canada
