Higher CPP deductions are coming to paycheques this year — here's what to expect
TORONTO — Middle-income earners will start seeing a larger portion of their paycheques going toward Canada Pension Plan contributions as of Jan. 1.
A broader pension revamp began in 2019 as both the Quebec Pension Plan and CPP began phasing in enhanced benefits intended to provide more financial support for Canadians after they retire. So far, individual contributions — and the employer’s matching portion — have primarily ticked upward.
The trade-off is that Canadians will eventually receive higher payouts once they start collecting their pensions.
But as of 2024, the CPP includes a new, second earnings ceiling. For those who make more than a given amount, additional payroll deductions now apply.
“The primary objective of these changes is to strengthen benefits and enhance overall financial stability for prospective retirees,” said Alim Dhanji, senior wealth adviser at Assante Financial Management Ltd. in Vancouver.
Previously, everyone earning over the base amount (currently $3,500) contributes a set portion of their income, up to a maximum amount (last year’s was $66,600) that increases slightly every year. Those who are self employed pay both the employee and employer portions.
Starting this year, the enhanced pension plan now has two earnings ceilings.
The first tier works similarly to the old system: just like before, workers contribute a set portion of their earnings to CPP, up to a government-set threshold — for 2024, it’s $68,500. Those earning that amount or less won’t see any changes to their current contribution rates.
What’s new, for anyone earning more than that amount, is a second contribution level that tops out at $73,200.
People in this group pay an additional four per cent on their second tier earnings,
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