Dec 10, 2018
Personal Investor: Pay more, get more from CPP starting in 2019
By Dale Jackson
Canada’s national nest will be getting re-feathered starting in 2019.
Changes to the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) will be phased in over the next seven years to bring retirement benefits from one-quarter of an individual’s average work earnings to one-third.
The change comes as a response to a decline in defined-benefit pensions, which guarantee regular payouts, to defined-contribution pensions, which forces retirees to bank up and manage their own pension savings.
The maximum limit used to determine average work earnings will also gradually increase by 14 per cent by 2025.
Employees and employers will continue to split the contributions. Here’s a chart showing how contribution rates will change:
With growing contributions come growing payouts. Pension benefits will increase based on how much and for how long you contribute to the enhanced CPP. Baby boomers and generation Xers will gain less than millennials or generation Z because it will take 45 years to achieve maximum benefits.
The maximum CPP annual benefit is currently $13,610. That amount and future increases will be adjusted to inflation. By the time the enhancement is complete the maximum benefit would be about $21,000 in today’s dollars.
Survivor and disability benefits will also increase. If you have any questions you can access your personal account on the Canada Revenue Agency (CRA) website.
