Government Plans for Increased Canada Pension Plan (CPP) for Businesses and Employees

  • Starting on January 1st, 2019, the Canada Pension Plan (CPP) will gradually be increased.  As a result, pension amounts will increase by between 33% and 50% depending on the earnings of the employee.
  • This will also increase the amounts of CPP disability and survivor benefits.
  • This initiative will be fully implemented by 2025. However, a person will have to contribute to the increase in CPP for 40 years to get the full increase in benefits.  With the new plan, the new maximum retirement pension would be $20,400 annually, for someone with earnings at or above the new upper earnings limit throughout their career.
  • Employees and employers will contribute more on earnings up to the maximum amount of eligible earnings under the CPP. This will be phased in over the first five years. As of 2023, the CPP contribution rate will be one percentage point higher (from 4.95% to 5.95%) for both employers and employees. People who are self-employed pay both shares, so their contribution rate will be two percentage points higher.
  • Beginning in 2024, a contribution rate of 4% for both the employers and employees (eight percentage points for self-employed individuals, who pay both shares) will apply on earnings between the year’s maximum pensionable earnings and the new upper earnings limit, which will be increased in two steps in 2024 and 2025.
  • To offset the higher CPP contributions for low-income workers, they will be able to apply for the new Canada Workers Benefit announced in Budget 2018 that will replace the Working Income Tax Benefit. It is a refundable tax credit intended to provide tax relief for eligible working low-income individuals and families who are already in the workforce and to encourage other Canadians to enter the workforce.