This year, your contributions to the Canadian Pension Plan (CPP) are going to look a little different, and you might be wondering, why, how and its impact on you. Let’s help fill in those gaps and provide some more information on CPP’s enhancement.

What is the enhancement

The CPP enhancement, which was introduced in 2019, is designed to help increase retirement income for working Canadians and their families. Since then, the contribution rate has gradually increased to a total 1% increase as of January 1, 2023. How much increase you receive once you retire will depend on how long and how much you would have contributed to the enhanced CPP.

How it’s going to work

CPP contributions are deducted from your paycheque each pay period until you reach the set maximum amount for the year. This yearly limit, known as the Year’s Maximum Pensionable Earnings (YMPE) or first earnings ceiling, is determined by the government based on the average wage in Canada. For 2024, it stands at $68,500.

This January, the government introduced a second earnings ceiling amount above the YMPE –$73,200 in 2024 – also known as the Year’s Additional Maximum Pensionable Earnings (YAMPE). Starting in 2024, employees and employers will each contribute an additional 4% on earnings above the first earnings ceiling, up to the amount of the second earnings ceiling (for self-employed individuals this will be 8% of income earned between the first and second earnings ceiling)

What does this mean for you

As a CAAT member you have nothing to worry about. The new CPP changes do not impact your CAAT pension any way:

Active members

If you are in DBprime:

• Your contributions (and your employer’s contributions on your behalf) will be based on the first earnings ceiling, the YMPE. You can learn more about your pension contributions here.
• Your pension will continue to be calculated using a formula based on the average YMPE, in other words, the first earnings ceiling.

If you are in DBplus:

• DBplus does not use the YMPE to determine contributions, or to calculate your pension.

Retired members

Retired members also do not have to worry about the enhancement as you are already collecting your pension and not making any further contributions.

The aim of the CPP enhancements is to help increase government support for working Canadians during retirement. Depending on how long you contribute to the enhanced CPP, you may witness a considerable increase in your government pension.

Visit the Government of Canada’s website to learn more.