What to change to the CPP starting this year
Feb. 08, 2019
Global Korean Post
Starting in January 2019, working Canadians contribute a little more to get higher CPP benefit payments when they retire. These changes in CPP contributions are being phased in gradually over seven years in small increases.
Up until 2019, the CPP retirement pension replaced one quarter of your average work earnings. This average is based on your work earnings, up to a maximum earnings limit each year. Other sources of income—such as the Old Age Security program, workplace pensions and private savings—make up the rest of your retirement income.
The enhancement means that the CPP will begin to grow to replace one third of the average work earnings you receive after 2019. The maximum limit used to determine your average work earnings will also gradually increase by 14% by 2025.
Your pension will increase based on how much and for how long you contribute to the enhanced CPP. The CPP enhancements will increase the maximum CPP retirement pension by up to 50% for those who make enhanced contributions for 40 years.
The enhancement also applies to the CPP post-retirement benefit. If you are receiving the CPP (or QPP) retirement pension and you continue to work and make CPP contributions in 2019 or later, your post-retirement benefits will be higher.
Changes to CPP contributions
You contribute to the CPP if you are over the age of 18, work in Canada (outside of Quebec) and earn more than $3,500 a year.
You only contribute on employment earnings between $3,500 and an annual earnings limit (adjusted each year based on changes in the average wage in Canada). In 2019 this limit is $ 57,400.
Before January 1, 2019, employees contributed 4.95% on these earnings to the CPP. Employers made an equal contribution. If you are self-employed, you contributed both the employee and employer portions, which was equal to 9.9%.
The increase in contributions as a result of the enhancement will be phased in gradually over 7 years in 2 steps: