What is the Canada Pension Plan?
The Canada Pension Plan (CPP) is a mandatory pension plan to help Canadian workers (every person over 18 years of age, who works in Canada and earns over $3,500 per year), in their retirement.
- Employees, employers and the self-employed are all required to contribute and participate.
- Employers must match employees’ contributions.
- Self-employed individuals are considered both the employee and the employer and must pay both portions of the contribution.
Why did the CPP premiums change?
The Canada Pension Plan (CPP) has been overhauled to increase the pension amount that will be available to the current workforce when they are eligible for CPP.
- To pay for this overhaul, CPP premiums have increased and will continue to increase until 2023 when additional premiums will come into effect for higher income earners.
- To receive the full benefit of the new Enhanced CPP Program, a person must contribute to it for 40 years.
- The CPP benefit increase for those who do not contribute to the enhanced program for 40 years will be calculated based on contributions to both the old program and the enhanced program.
CPP Premium Increase Schedule
| YEAR | REGULAR CPP RATE | MAX. PENSIONABLE EARNINGS | MAX. REGULAR PREMIUMS |
|---|---|---|---|
| 2018 | 4.95% | $ 55,900 | $ 2,593.80 |
| 2019 | 5.10% | $ 57,400 | $ 2,748.90 |
| 2020 | 5.25% | $ 58,800 | $ 3,087.00 |
| 2021 | 5.45% | $ 60,300 | $ 3,286.35 |
| 2022 | 5.70% | $ 61,800 | $ 3,522.60 |
| 2023 | 5.95% | $ 63,400 | $ 3,722.30 |
How do these changes affect a business and its cashflow?
All businesses will experience an increase in cash outflow due to the mandatory participation in CPP and the increased premiums for each of their employees. By 2023:
- Businesses will experience an increase in its CPP expense per employee of 1% ** ($3,722.30 – $2,593.80 = $1,128.50 per employee or 5.95% – 4.95% = 1.00%)
- Sole Proprietors aka: “self-employed” will have an increase in their CPP expense of 2% because they pay as both the employee and the employer. **($3,722.30 – $2,593.80) X 2 = $2,257.00 or (5.95% – 4.95%) X 2 = 2.00%)
**Calculations are based on maximum pensionable earnings.
How can I get a copy of my Canada Pension Statement?
You can get a copy of your Canada Pension statement in two ways:
- Through your My Service Canada Account where you can access, download, print and view your statement online.
- Request a copy of your statement by mail from Canada Pension Plan Statement.
For more information visit the Canada Pension (CPP) – CRA Website.