Canada Pension Plan Changes.
What Does This Mean for Workers & Employers?
Most of Canada’s finance ministers reached an agreement in principle this week to revamp the Canada Pension Plan. Quebec and Manitoba have not signed on to the deal. Quebec has its own pension plan, and Manitoba will continue to be part of the process yet the deal comes too soon for the province’s four week old government.
Increased premiums will be phased in over seven years,
starting in 2019.
Under this “agreement in principle”, which would go into effect in 2019, an average Canadian worker earning about $55,000 will pay an additional $7 a month in 2019. That would increase to $34 a month by 2023. The maximum amount of income subject to CPP will increase by 14% to $82,700.
Once the plan is fully implemented, the maximum annual benefits will increase by about one-third to $17,748. from about $13,000.
Mandatory matching contributions will also mean a jump in payroll expenses for employers. As such, many small business owners are against it. The Canadian Federation of Independent Business claimed this hike as “a devastating move for Canadian workers and the economy in general.” They went on to say that “71 per cent of small business owners oppose a mandatory premium hike”.
So why now? Well, Finance Minister Bill Morneau said the deal will improve CPP in a way that will make a difference to working Canadians.
“We have come to a conclusion that we are going to improve the retirement security of Canadians, we’re going to improve the Canada Pension Plan that will make a real difference in future Canadians’ situations,” he said.
At what age can you expect to collect? The fine print…
The standard age for beginning to receive your CPP retirement pension is the month after your 65th birthday. However, you can take a reduced pension as early as age 60 or begin receiving an increased pension after age 65.
So, you want to begin receiving your monthly payments as early as age 60? Know that doing so comes at a cost. There’s a reduction in the amount received for each month before age 65 that you start collecting. Your pension will be reduced, by up to 36% at age 60.
Alternatively, delaying creates the opposite effect. If you take it after age 65, your pension may jump by up to 42% at age 70.
The Ink Is Not Dry
Provinces have until July 15 to officially sign on to the agreement before it becomes formalized, and any changes requires the consent of Ottawa and a minimum of seven provinces representing at least two-thirds of the country’s population.
For more information on the Canada Pension Plan visit: http://www.esdc.gc.ca/en/cpp/index.page?# , or;