In many updates, it has been mentioned that the middle class in Canada has been working hard to meet their basic needs, as the cost of living keeps on getting a raise with every year. Not only that, it has also been reported that the Canadians are worried about their retirement planning, and the main reason for this has been that many Canadians who are working do not have any workplace plans for pension for their old age. This is also added to the worry which is a result of Canadians not having a lot of money to use for their retirement planning from early stages.
This had become a big issue, and to help with this, the Canadian Government had decided to help the citizens achieve their personal goals when they retire so they can live a secure, and happy life when they are old. This is to say that the Government in Canada has been in the process to increase the benefits which are provided as part of the Canada Pension Plan, or as it is also known popularly as, the CPP. It was reported in the year 2016, that the agreements were complete in June 2016 to have a plan for the enhancement of this CPP in the coming years.
CAD 1900/Year CPP Increase
The CPP increase or the CPP boost is going to be helpful for the Canadian residents who have been worried about their retirement plans, and the new citizens who will be joining the workforce soon in the country. It was agreed that the CPP Enhancement was an important step, and to help with the increase, the process is going to continue for a total of 7 years (starting from 2019), which is to say that the increase was brought slowly, and by the end of the seventh year, the increase will be finished. This seven year period from 2019 was called as the phase-in period for the CPP Enhancement.
For now, the other options which are used by the Canadians to help with their retirement planning include the names of Old Age Security plans, the Quebec Pension Plan or the QPP, and the private saving options (like the Registered Retirement Savings Plans). This is good news as the CPP Enhancement is going to be helpful for the seniors in the coming decades to get higher benefits for the CPP amount which is provided by the Federal Government in Canada. This is going to be completed with the help of an increase (which is very small) in the amounts which the CPP is going to get from its contributors.
CPP Enhancement 2024 Overview
|Contribution Rate Up from 4.95% to 5.95%
|New Earnings Limit from 2024
Annual Increase in CPP
The CPP Enhancement is going to be helpful for the Canadians who have been contributing or who are working from 2019 or after. To get an idea of the CPP Enhancement, it is mentioned that the enhancement is going to add new components to the CPP, but it must be noted, that these two new components are not going to be separate or new benefits, but they will be the top-ups for the base CPP. This is to say that the new CPP is going to have the components of the Base CPP, the First Additional Component, and the Second Additional Component.
Not only that, the good news for the eligible Canadians is that the increase is also going to enhance the amount or the benefits which are received as part of the CPP Retirement Pension, Canada’s Disability Pension, the post-retirement benefits and support, and the survivor’s pension at the same time. As per the reports, the First Additional Component was phased in starting from 2019 until 2023. But the CPP’s Second Additional Component phase in period will start from 2024 and end in 2025.
CPP Enhancement in Benefits 2024
The new CPP Benefits increase is going to help the residents with about a 33% replacement of the individual’s average work earnings from the old 25% replacement of earnings after they retired. Between 2024 and 2025, the maximum earnings which can be protected by the CPP is also set with a limit of 14%. The pension benefits after the CPP Enhancement are going to be decided by the amount contributed and the duration of these contributions. As per the reports, the enhancement is going to increase the CPP Retirement Pension with a maximum limit of about 50% if the individual has made the required contributions for at least about 40 years.
CPP Increase Amount 2024
The amount contributed is decided between the amount $3500 and an Annual Earnings Limit, which is decided and calculated for every year with the help of average wage of Canadian workers. The Annual Earnings Limit for the year of 2023 has been mentioned to be about $66,600. Following this, the first additional CPP Component which had been phased between 2019 and 2023 has led the contribution rates for the employees to increase by 1 percent (from the old 4.95% to the new 5.95%). With the start of 2024, there is going to be a new earnings limit which will be used.
This new earnings limit which is going to be used by the Canadian Government in 2024 is called as the Year’s Additional Maximum Pensionable Earnings, but it must be noted that it will not replace the original Year’s Maximum Pensionable Earnings. This will be helpful in creating two ranges of income, known as, the Original Range, and the Additional Range. The Original Limit is estimated to be $71,200 by 2025, and the New Limit is estimated to be around $81,100 by 2025.