Enhanced Canadian Pension Plan (CPP)

With the blessing of British Columbia province, the enhanced CPP is well on its way of being implemented beginning January 1, 2019. Note that  consent from two-thirds of provinces representing two-thirds of the population is required to proceed with the expansion. Below are some highlights of the plan:

Increase income replacement to one-third from one-quarter of pensionable earnings, thereby boosting the maximum CPP benefit to $17,478 from the current level of roughly $13,000.

Contribution rate to gradually increase from 4.95% to 5.95% beginning January 2019 for both employee and employer. In 2020, the rate increased to 5.25%, 2021 to  5.45%, 2022 to 5.7%, and finally by  2023 to  5.95%

A worker earning $55,000 a year would see monthly premiums increase by $7 in 2019. By 2023, that would increase to $34 a month.

In 2025, the yearly maximum pensionable earnings threshold will be $72,500, and upper earnings limit will move to $82,700. Difference of $10,000 will be subject to a four per cent contribution rate.

Both employee and employer contributions to the CPP enhancement will be tax-deductible.

For those of you still skeptical on whether or not there will be a government pension to draw upon, it is comforting to note that at the end of December 31, 2015, total CPP assets stood at C$285 billion, excluding assets from Quebec Pension Plan (QPP).  By global standards, CPP ranks 9th in terms of asset size.  The largest pension fund is the Government Pension Investment Fund of Japan with assets in excess of US$1.2 billion.