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Canada Pension Plan Enhancement

Posted by David Gobeil on

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.

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