There will be significant changes to Canada Pension Plan (CPP) premiums and benefits, starting in January 2019.
Changes will be introduced in two phases. In the first phase, premiums paid by employees and employers will be gradually increased, by approximately .20% of earnings per year, from 2019 to 2023.
Currently, premiums paid by an employee, and matched by their employer, are equal to 4.95% of their earnings, up to an annual maximum known as their Yearly Maximum Pensionable Earnings (YMPE). By 2023, their premiums will have increased to 5.95% of their earnings.
The second phase will focus on more substantial increases to YMPE. In 2017, YMPE will be $55,300. By 2025, YMPE will be increased to approximately $82,700.
If YMPE has increased to $82,700, the maximum premium payable will be $4,514 per year. This amount will be matched by the employer.
Self-employed individuals could pay premiums of $9,028 per year by the time the program changes are fully implemented, as they have to pay both the employee and employer portions of the premium.
Eventually, pensioners will receive increased benefit cheques. Currently, pensioners receive 25% of their average earnings. This will increase to 33%.
However, because the average is calculated based on 39 years of earnings, it will be decades before recipients receive the full benefits of these changes.