The basic exemption limit has not been raised but contribution rates are frozen
Canadians will contribute to the Canadian Pension Plan on up to $68,500 in pensionable earnings from 2024, continuing the changes to the mandatory retirement system in recent years.
The Canada Revenue Agency has announced the increase in the limit from $66,600 this year, while the basic exemption amount will remain at $3,500.
A new secondary threshold has also been introduced for 2024, which means that CPP2 contributions will be due on pensionable earnings between $68,500 and $73,200.
The CRA says the new limits were calculated in accordance with the CPP legislation and account for the growth in average weekly wages and salaries in Canada.
Although the contribution rate has been increasing since 2019, the current 5.95% rate for employers and employees will not change in 2024. However, the maximum contribution will be $3,867.50 each—up from $3,754.45 in 2023. For self-employed Canadians, the CPP contribution rate remains at 11.90%, and the maximum contribution will be $7,735.00—up from $7,508.90 in 2023.
For the new CPP2 contributions, the rate will be 4% with a maximum contribution of $188 for employers and employees. For the self-employed the rate will be 8% with a maximum $376.
A better retirement
Recently, Mercer Canada’s principal, and senior wealth advisor, F. Hubert Tremblay, shared with Wealth Professional his insights into how the Canadian retirement income system could be improved.
He said that too many in the private sector are relying on the public pension plans to provide their retirement income, but this may mean delaying retirement.
“Because participation to an occupational pension plan is not mandatory, many workers do not participate in any savings program with their employer. Savings rates are too low to compensate for this lack of coverage. In this context, it is possible that Canadians will have to work longer and delay commencement of pensions from public pension plans to get better retirement income,” he said.
He urged greater participation in workplace schemes and that people understand how to make the most of their contributions to public plans.
“Public pension plans are gradually playing a larger role in the financial security of Canadians into retirement. They must be optimized to get the most out of them,” he added.
