5 Key Changes Coming to CPP with New Agreement Between Federal Government and 8 Provinces

On June 20, 2016, the Government of Canada and 8 provinces reached an agreement in principle for changes to the Canada Pension Plan (CPP).
Categories: Employee Benefits
Aug 23rd, 2017 | By: Chris Nielsen

On June 20, 2016, the Government of Canada and 8 provinces reached an agreement in principle for changes to the Canada Pension Plan (CPP).

According to the tentative agreement, the CPP changes will be phased in over the course of seven years, beginning on Jan. 1, 2019, and will require workers and their employers to pay higher contributions.



This new deal will mark the first significant increase in CPP benefits since the program was first launched 50 years ago. In general, the CPP aims to help Canadians enjoy a financially safe retirement and ensures a strong public pension system.

Under the current CPP system, employers and employees each contribute 4.95 per cent of their income between $3,500 and $54,900, with the maximum CPP benefit being $13,110.

The major details of the deal include the following:

•There will be a 1% contribution increase for employers and employees once the CPP is fully phased in.

•Income replacement will increase from one-fourth to one-third of pensionable earnings.

•The maximum income that is subject to CPP contributions will increase from $54,900 to $82,700 by 2025.

•An increase to the federal Working Income Tax Benefit has been promised to help low-income earners.

•A tax deduction, instead of a tax credit, will be provided for employee contributions associated with the enhanced portion of the CPP.

Quebec and Manitoba are the only two provinces that have not signed the agreement. Quebec has been an outspoken detractor of the CPP, saying that the plan is too expensive. Proponents of the CPP say that it will help low-income Canadians and young people who don’t have access to defined benefit pensions.

To read the official news release from the Department of Finance, click here.


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