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CPP Enhancement Solution Reached

Canada’s finance ministers have agreed on a Canada Pension Plan (CPP) that would increase the maximum amount of income subject to CPP by 14 per cent, which is projected to be equal to roughly $82,700 in 2025. It will also increase income replacement from one-quarter to one-third of pensionable earnings. This means that, at maturity, a Canadian with $50,000 in constant earnings throughout their working life would receive a yearly pension benefit of around $16,000 instead of the $12,000 they would currently receive. To ensure that the changes are affordable, it will introduce a gradual phase-in starting January 1 that will allow more time for businesses to adjust. It will also enhance the federal Working Income Tax Benefit to offset the impact of increased contributions on low income workers and provide a tax deduction ‒ instead of a tax credit ‒ for employee contributions associated with the enhanced portion of CPP in order to avoid increasing the after-tax cost of saving.

Courtesy of Benefits and Pensions Monitor website News Alerts 


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