What You Should Know About Changes to the Canada Pension Plan

If you’re planning to rely on the CPP as part of your retirement income, listen up. The Canada Pension Plan (CPP) will see some significant changes as of January 1, 2019.

Canada’s Minister of Finance, Bill Morneau, has now been joined by all provincial officials in agreeing to increase current CPP benefits from 25% of Canadian employees average adjusted earnings to 33%.

The changes won’t happen overnight, however, but will be phased in over six years, beginning in 2019.

So that’s the good news.

Here’s the catch…

These extra funds aren’t being plucked from the clouds, and this means employees, employers, and self-employed persons will have to increase contributions. Still, these changes will also be phased in beginning in 2019 and will be fully in effect as of 2024. Only citizens who pay for 40 years after 2018 will see the complete benefit of the enhanced CPP.

With the increase in the benefit also comes an increase in the upper earnings limit, which – as of 2025 – should be just over $82,000. The exact amounts will depend on the both employee earnings and contributions.

To get some cold, hard numbers on how this will impact your retirement plans, we recommend doing a little research. The fact remains that no matter what your income, if you’re in the work-a-day grind now, these changes will impact you, and if you can adjust your contributions once they take effect, you can really make them work in your favour.