2024 Canada Pension Plan Update

/ By Michael Todic

What does it mean for you?

As we approach the end of 2023 and enter 2024, let's review Canada's ongoing effort to improve and expand the Canada Pension Plan (CPP) through Bill C-26.

How does CPP work?

The CPP is a mandatory pension plan for most workers in Canada, excluding Quebec, who have the Quebec Pension Plan (QPP) and anyone earning less than $3,500 annually.1 CPP provides workers with monthly payments during retirement. The size of those payments depends on an individual's earnings during their working years. The federal government sets a yearly maximum pensionable earnings (YMPE) amount, the maximum salary amount for CPP contributions.

What's changing?

Before January 1, 2019, employees contributed 4.95% of their earnings to CPP.2 Since the CPP enhancement took effect in 2019, the rate at which we're required to contribute to CPP has grown by one percentage point to 5.95% in 2023.3 The maximum pensionable earnings under CPP will increase to $68,500 in 2024, compared to $66,600 in 2023, with a basic exemption amount of $3,500.4 A secondary tier of additional maximum pensionable earnings, CPP2, will be introduced in 2024, where individuals earning between $68,500 and $73,200 will be required to contribute to CPP a second time.5 This additional contribution rate is 4% or a maximum amount of $188 (($73,200-$68,500) x 4% = $188).6

How will these changes affect you?

Although many workers have and will continue to contribute more to CPP in the future, this new enhancement will only benefit those retirees who have worked and contributed to the program since 2019 (when the annual contribution rates began to rise). Those entering the workforce now will see the most significant increase in their benefits. At the same time, those close to retirement will only receive a modest increase.

Questions?

If you have questions or need more information about the CPP enhancement or your workplace savings plan, contact your dedicated advisor using our Make Sense service, offered exclusively to Cowan clients, at 1-866-345-8256 or makesense@cowangroup.ca

Sources

  1. Government of Canada. (May 8, 2023). The Canada Pension Plan enhancement – Businesses, individuals, and self-employed: what it means for you. Retrieved from URL.
  2. Government of Canada. (May 8, 2023). The Canada Pension Plan enhancement – Businesses, individuals, and self-employed: what it means for you. Retrieved from URL.
  3. Government of Canada. (May 8, 2023). The Canada Pension Plan enhancement – Businesses, individuals, and self-employed: what it means for you. Retrieved from URL.
  4. Government of Canada. (November 1, 2023). Canada Revenue Agency announces maximum pensionable earnings and contributions for 2024. Retrieved from URL.
  5. Government of Canada. (November 1, 2023). Canada Revenue Agency announces maximum pensionable earnings and contributions for 2024. Retrieved from URL.
  6. Government of Canada. (November 1, 2023). Canada Revenue Agency announces maximum pensionable earnings and contributions for 2024. Retrieved from URL.

The Latest Posts

Beyond Borders: Navigating Medical Tourism and Disability Management

Beyond Borders: Navigating Medical Tourism and Disability Management

With wait times growing exponentially for specialists, surgeries, and medical investigations across Canada, many Canadians are looking to other countries […]

Read more
Time is Money | Making the Most of Your RRSP Contributions

Time is Money | Making the Most of Your RRSP Contributions

Are your employees eager to align their New Year's resolutions and financial goals? Making extra lump sum contributions to an RRSP within the first 60 […]

Read more
Our 2024 Government Benefit Update is Now Available

Our 2024 Government Benefit Update is Now Available

Each year, we provide a government benefits reference chart that summarizes the limits and rates associated with Canada and Quebec Pension Plan, Old Age […]

Read more