The New Enhanced and Expensive CPP Contributions for 2024

Retirement Income & Tax Planning, Calgary

Some employees will start seeing a larger portion of their paycheques going toward CPP contributions in 2024.

This is part of a broader pension revamp that began in 2019 as the CPP began phasing in enhanced benefits intended to provide more benefits for Canadians after they retire. So far, individual contributions – and the employer’s matching portion – have increased over the past 5 years and will increase some more in 2024 for people earning more than $68,500 a year.

The trade-off is that Canadians will eventually receive higher payouts once they start collecting their pensions.

But as of 2024, the CPP includes a new, second-earnings ceiling. For those who make more than $68,500, additional payroll deductions now apply.

Previously, everyone earning over the base amount (currently $3,500) contributes a set portion of their income, up to a maximum amount (last year’s was $66,600 and that increases every year). Those who are self-employed pay both the employee and employer portions.

Starting this year, the enhanced pension plan now has two earnings ceilings.

The first tier works similarly to the old system: Just like before, workers contribute a set portion of their earnings to CPP, up to a government-set threshold – for 2024, it’s now increased to $68,500. Those earning that amount or less won’t see any changes to their current contribution rates, which is 5.95%. You don't pay any CPP premiums on the first $3500 of income.

What’s new, for anyone earning more than that amount, is a second contribution level that tops out at $73,200.

People in this group pay an additional 4 percent on their second-tier earnings or the amount they make between $68,500 and $73,200.

For 2024, that means a maximum of $188 in additional payroll deductions for the employee and also that amount for the employer.

The upgraded CPP policies, which continue phasing in through next year, were designed to significantly boost retirement income for Canadians when they retire – an increase from one-quarter of their eligible income to one-third.

Anyone who has paid into CPP since 2019 will receive higher benefits, but the benefits will take decades to fully materialize. Canadians retiring 40 years from now will see their income go up by more than 50 percent compared with the current pension beneficiaries.

Changes will not affect the eligibility criteria for retirement pension, postretirement benefits, disability pension and survivor’s pension.

Employers have been affected by the phased increase since 2019, he said. Between that year and 2023, both workers and their employers saw contribution rates rise by a full percentage point - from 4.95% to 5.95%.

Canadian employers match their workers’ pension earnings as a part of the policy. While the pension amount gets split between the employer and workers, freelancers and self-employed people are responsible for paying both portions – a combined 11.9 percent for the first tier and 8 percent for the second tier.

If you are an employee, this may not be a big deal. It costs you more now, but you'll also get a little more later.

If you are an incorporated business owner, this is costing you more money so you may want to consider only paying yourself a T-4 salary up to the first tier ($68,500 in 2024) and dividends afterwards. 

We help our clients create sustainable, predictable, and tax-efficient cash flow for retirement, to ensure they do not overspend and run out of money; or underspend and die the richest people in the graveyard.

Want to retire soon? Learn more about our services and book an appointment.


Retirement Income, Investment, & Tax Planners,

Willis J Langford CFP

Nancy Langford CRS

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