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Last updated: November 02 2023
Significant CPP Premium Hike Arrives in 2024
Evelyn Jacks
In June 2016, federal and provincial finance ministers agreed on enhancements to the Canada Pension Plan (CPP). The goal was to increase the pension available to the current generation of workers from the 25% of pensionable earnings to 33% of pensionable earnings. But this has come with substantive premium increases, and starting in January of 2024, a second tier of additional premiums for higher earners. Small businesses and the self employed will be particularly concerned about these increased premiums, which were officially announced on November 1. Here are the details.
According to the plan, the contribution rate will increase annually over the period 2019 to 2023. Then, in 2024, the basic rate will remain the same but an additional premium will be required on the next $4,700 over the maximum pensionable earnings. In 2025 that premium would be on the first $9,700 over the maximum pensionable earnings. The contribution rate on these enhanced pensionable earnings will be 4%. This additional premium would be paid by both the employer and the employee. The additional premiums will be tax deductible (rather than a non-refundable credit). Self-employed individuals will, of course, have to pay both the employer and employee premiums.
The following table shows the projected premiums to the year 2025, adjusted for known pensionable earnings through to 2024 and estimations for 2025.
|
Year |
Regular CPP Rate |
Max. Pens. Earn. |
Max. Reg. Premiums |
Max. Regular Self Employed Premium |
Add. Pens. Earn. |
Max. Pens. Earn. |
Add. Rate |
Add. Prem. |
Total Prem. |
Max. SE Prem. |
|
2018 |
4.95% |
$55,900 |
$2,593.80 |
|
|
$55,900 |
0% |
|
$2,593.80 |
$5,187.60 |
|
2019 |
5.10% |
$57,400 |
$2,748.90 |
|
|
$57,400 |
0% |
|
$2,748.90 |
$5,497.80 |
|
2020 |
5.25% |
$58,700 |
$2,898.00 |
|
|
$58,700 |
0% |
|
$2,898.00 |
$5,796.00 |
|
2021 |
5.45% |
$61,600 |
$3,166.45 |
|
|
$61,600 |
0% |
|
$3,166.45 |
$6,332.90 |
|
2022 |
5.70% |
$64,900 |
$3,499.80 |
|
|
$64,900 |
0% |
|
$3,499.80 |
$6,999.60 |
|
2023 |
5.95% |
$66,900 |
$3,754.45 |
|
|
$66,900 |
0% |
|
$3,754.45 |
$7,508.90 |
|
2024* |
5.95% |
$68,500 |
$3,867.50 |
$7735.00 |
$4,700 |
$73,200 |
4.00% |
$188.00 |
$4,055.50 |
$8,111.00 |
|
2025 |
5.95% |
$69,700 |
$3,938.90 |
$7877.80 |
$9,700 |
$79,400 |
4.00% |
$388.00 |
$4,326.90 |
$8,653.80 |
*These new ceiling levels for 2024 were announced on November 1, 2023 and take into account the growth in average weekly wages and salaries in Canada. Note: On pensionable earnings above $73,200, no contributions are allowed. The 2025 amounts are estimated.
The second tier premiums will also be displayed differently on the T4 slip. Specifically, the following new boxes will have numbers in them for 2024 and future years:
- Box 16A:employee’s Second Additional CPP Contributions (CPP2)
- Box 17A:employee’s Second Additional QPP Contributions (QPP2)
How to make a difference: Help employees and self-employed people understand and plan for this new expense in 2024. It will eat up more savings room and therefore contributions to registered plans before the end of the year are recommended.
