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:
- Here are benefit payment dates
- It hasn't been announced, but you're likely to see an increase of 1%
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?