22 December, 2023 Financial Planning

Planner’s Corner: CPP Expansion

Working Canadians 18 and older make Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions based on their earnings between a fixed exemption amount of $3,500 and the year’s maximum pensionable earnings (YMPE) threshold. The YMPE amount is indexed to inflation. In 2023 the YMPE was $66,600

Between 2019 – 2023, contribution rates on earnings up to the YMPE were increased annually to 5.95% employee/5.95% employer. Self-employed people must contribute both the employer and employee amounts. 




Beginning in 2024, a second, higher limit, known as the year's additional maximum pensionable earnings (YAMPE) takes effect. CPP contributions between the YMPE and YAMPE, will be 4% each for the employer and employee, and known as the second additional contribution. Note: self-employed people will pay 8%. The additional contribution amounts are kept in a separate account, but still form part of the CPP. Contributors who retire and begin drawing CPP will receive the base CPP plus an enhanced portion based on their lifetime contributions.

In 2024 the YMPE will be $68,500 and the YAMPE $73,200. At 4%, the additional maximum contribution will be $188 each; the self-employed contribution will be $376.

Bottom line: for employees who make $68,500 or higher, employees and employers combined, will pay $935.30 more in 2024 due to increase of YMPE due to inflation + the second additional contribution. 

The questions I have, which will remain unanswered, is the second additional contribution necessary and how much responsibility do Canadians have to save for their own retirement?

Jim Hummel, CFP® CKA®

Sources: Rudy Mezzetta, Investment Executive, April 11, 2023