Changes coming to Canada Pension Plan in 2024

The limit of how much of your income you contribute to the Canada Pension Plan (CPP) has increased over the years, but 2024 will see a significant change for middle income earners.

“The change this year that's different is they're adding a second tier to the pension plan,” explained Matt Davison, professor of mathematics and statistical sciences at Western University.

The ceiling for what is now tier one of CPP will rise to $68,500, while additional deductions on people making more than that will be 4 per cent on earnings up to $73,200, but will not exceed $188 per year.

This will also be matched by employers.

“The rate is going to increase, but people in particular, those middle income earners, are going to be paying for longer because there's going to be a second threshold until which they pay at a lower rate,” said Christina Santini, director of national affairs for the Canadian Federation of Independent Businesses (CFIB).

The government has been slowly increasing the thresholds for CPP payments, but is now creating a second tier aimed at helping middle income earners prepare for retirement, Davison added.

“The reason for that is Canadians are just having trouble saving enough for retirement. And about 40 per cent of Canadians are really worried that they haven't they're not going to have nearly enough in retirement,” he said.

Not only will employees get hit with more deductions, employers have to match the added payments, on top of increased payments to EI and other programs. Santini said these extra costs could hurt smaller companies.

“For an employer, it's kind of higher payroll taxes. It's something that they have to absorb as part of the cost of doing business. It's something that they have to pay whether or not they're making a profit,” she said.

“The added tier means when those middle income earners retire they will receive a higher payment from CPP, and the threshold is expected to increase year after year,” Santini added.