Canada Pension Plan Changes for 2021 - what you need to know

December 11, 2020 | Vito Finucci


Will the pandemic lead to higher future premiums?

CPP changes for 2021

There have been a few articles on CPP changes, here is what you need to know:

CPP is slowly changing:

  • The government announced an enhancement in 2016. It is designed to increase the CPP income replacement level from 25% to 33.3% of eligible earnings.
  • They are doing this in two phases:
    • Phase 1 (2019-2023) will focus on increasing the contribution percentage by 1% from 4.95% to 5.95%. 2021 is the third year in the process - we will be halfway through.
    • Phase 2 (2024-2025) will focus on increasing the Yearly Maximum Pensionable Earnings (YMPE) aka increasing the amount of money you have to pay CPP premiums on.

Who pays into CPP?

  • There is both an Employee and Employer part. Self-employed individuals need to pay both.

What's new for 2021:

If you are contributing:

  • The 2021 required contribution rate has been increased to 5.45% (vs. the oriiginal 4.95% rate in 2018).
  • You pay this 5.45% on income up to $61,600 (the Year's Maximum Pensionable Earnings - YMPE).
  • At the new rate, the 2021 maximum contribution will be $3,166.45 each for employer and employee. Self-employed individuals pay both parts, totaling $6,332.90.

For people collecting CPP:

Should I take CPP early?

  • For most people the answer is no, but it is important to review your situation with a qualified financial professional.

Where can I find more information?