Management Brief: Canada Pension Plan Contributions
On December 15, 2016, Bill C-26 An Act to Amend the Canada Pension Plan, The Canada Pension Plan Investment Board Act and the Income Tax Act received Royal Assent. Within this Act, there were amendments to the Canada Pension Plan Contributions that took effect on January 1, 2019.
Currently in 2021, the employer and employee contribution rate is 5.45 percent. As of January 1, 2022, this contribution rate will increase to 5.7 percent. For 2021, the Maximum Annual Pensionable earnings is $64,900. The Year’s Basic Exemption for annual pensionable earning will remain at $3,500.
| Time Period | Employee Contribution Rate | Employer Contribution Rate | Self-employed Contribution Rate |
|---|---|---|---|
| Currently | 4.95% | 4.95% | 9.90% |
| Jan. to Dec. 2019 | 5.10% | 5.10% | 10.20% |
| Jan. to Dec. 2020 | 5.25% | 5.25% | 10.50% |
| Jan. to Dec. 2021 | 5.45% | 5.45% | 10.90% |
| Jan. to Dec. 2022 | 5.70% | 5.70% | 11.40% |
| Jan. 2023 and later | 5.95% | 5.95% | 11.90% |
Up until 2019, the CPP retirement pension replaced one quarter of your average work earnings. The average is based on your work earnings, up to a maximum limit each year. Other sources of income during retirement include Old Age Security program, workplace pensions and private savings. The intent is for the CPP to grow to eventually replace one third of your average work earnings.
For more information, please see the Canadian Pension Plan Enhancement.
Recommendation:
Employers should ensure their staff are aware of the increased CPP contribution level that will take effect January 1, 2022.
Additional Note: While some First Nation organizations do not contribute to the Canada Pension Plan. Some staff within these organizations may self contribute on their Income Tax Return. These rates increase as well.
For the Québec Pension plan, please refer to the Government of Quebec’s Retirement site.
