On June 20, 2016, Canada’s Ministers of Finance reached an agreement in principle to enhance the CPP.
The deal will increase how much working Canadians will get from the CPP: from one-quarter of their eligible earnings, to fully one-third, with an increase to the earnings limit.
The governments will phase these changes in over 7 years, from 2019 to 2025, so that the impact is gradual.
The Enhanced CPP has the following design features:
- the income replacement level will increase from one-quarter to one-third of income;
- the amount of the retirement pension, as well as the survivor’s and disability pensions and the post-retirement benefit, will increase subject to the amount of additional contributions made and the number of years over which those contributions are made;
- the upper earnings limit will be targeted at $82,700 upon full implementation in 2025;
- there will be a gradual 7-year phase-in beginning on January 1, 2019; and
- the enhanced portion of employee CPP contributions will be deductible.
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 on December 15, 2016.