What the Expanded CPP Means for You
“The federal government announced it is expanding the Canada Pension Plan (CPP),
which applies to all workplaces in Canada.
Currently under CPP, you and your employer each contribute 4.95 percent on the
money you earn above $3,500, until you earn $54,900 in a year.
At the current rates,
at retirement you can expect to receive 25 percent of your pre-retirement income
in CPP payments, up to a maximum of $13,110 per year.
The proposed increase will see the cap of $54,900 begin to rise in 2019 until it hits
$82,700 in 2025. Premiums will also begin to rise by 1 percent per year for both you
and your employer. To reduce the burden of this increase, the federal government is
introducing a tax deduction for worker contributions.
According to studies, these changes will make little difference to CPP payouts to
Canadians currently in the workforce, particularly those nearing retirement. Rather,
the main beneficiaries are those still in their teens and those early into their
careers, who can eventually expect to receive approximately 33 percent of their
pre-retirement income in CPP payments, up to $17,480 per year.