Information regarding the Canada Pension Plan is displayed of the service Canada website in Ottawa on Tuesday, January 31, 2012. THE CANADIAN PRESS/Sean Kilpatrick

Information regarding the Canada Pension Plan is displayed of the service Canada website in Ottawa on Tuesday, January 31, 2012. THE CANADIAN PRESS/Sean Kilpatrick

Planned increase in CPP premiums on Jan. 1 to hit some workers more due to pandemic

Planned increase on Jan. 1 is part of a multi-year plan approved by provinces and the federal government

Come Jan. 1, Canada Pension Plan contributions are going up again, although higher than originally planned. The reason is largely because of the pandemic’s effect on the labour market, which has some groups noting the impact will be felt by some workers more than others.

Here’s a rundown of what’s happening, and how long the effect might last.

Why premiums are going up

The planned increase on Jan. 1 is part of a multi-year plan approved by provinces and the federal government four years ago to boost retirement benefits through the public plan by increasing contributions over time.

The first premium bump was in 2019, another was earlier this year and the next is due at the beginning of 2021.

A KPMG note in November said the maximum employer and employee contributions will hit $3,166 each in 2021, an increase from the $2,898 this year. For self-employed contributions, the maximum amount will be $6,332, up from $5,796.

Why next year is different

The plan requires contributions to go up alongside the upper limit on earnings that are subject to those premiums.

For next year, the earnings ceiling, known as the yearly maximum pensionable earnings or YMPE, was supposed to be $60,200, an increase of $1,500 from the 2020 limit. But the actual amount is going to be higher at $61,600.

The reason is due to the pandemic’s effects on the labour market and how the YMPE is calculated.

The formula to calculate the earnings limit relies on increases in the average weekly earnings recorded over the year ending June 30, compared to the same figure during the preceding 12-month period.

Over the course of the pandemic, average weekly earnings have increased, but not because people are earning more.

More lower-income workers lost their jobs between March and June than higher-wage workers meaning there were fewer low-wage workers as part of the calculation. The federal chief actuary’s office says that’s why the overall increase is larger than originally projected

The reaction

Dan Kelly, president of the Canadian Federation of Independent Business, estimates that anyone around the maximum earnings limit will effectively see a 9.3 per cent increase in premiums, beyond the just over five-per-cent bump baked into law.

“That’s going to be hundreds of dollars of new CPP premiums out of paycheques of middle-income Canadians not because they got a raise, but because the formula has not had a COVID adjustment,” Kelly says.

“We think this is deeply unfair.”

Provincial finance ministers had asked the government to put a pause on increases for next year, pointing to the economic fallout from COVID-19, but that was easier said than done.

Any changes to contribution rates or the earnings ceiling at which point contributions top-out would need the approval of Parliament and seven provinces representing at least two-thirds of the national population — a higher bar than what’s required to amend the Constitution.

Bottom line

Contributions are going up next year. So too will the maximum earnings limit, beyond what was planned.

But federal officials expect the effect from the higher earnings limit to dissipate over time as jobs continue to come back after steep losses earlier in 2020.

Jordan Press, The Canadian Press

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

B.C. Finance Minister Selina Robinson outlines the province’s three-year budget in Victoria, April 20, 2021. (B.C. government video)
B.C. deficit to grow by $19 billion for COVID-19 recovery spending

Pandemic-year deficit $5 billion lower than forecast

DOH
Provincial grant tapped to finance downtown project

Butler and 10th next on improvement list

RDBN. (Priyanka Ketkar photo/Lakes District News)
Houston Soccer club. (Submitted/Houston Today)
Houston Soccer gets record number of registrations

Club will have a soccer season amidst COVID restrictions

District of Houston
Safe Restart grant spending firmed up

Will help cover losses from recreation fees

Canadian Prime Minister Justin Trudeau and United States President Joe Biden smile as they say farewell following a virtual joint statement in Ottawa, Tuesday, February 23, 2021. THE CANADIAN PRESS/Adrian Wyld
Trudeau pledges to cut emissions by 40% to 45% by 2030, short of U.S. goal

Trudeau announced target during a virtual climate summit convened by U.S. President Joe Biden

Letisha Reimer, 13, was killed Nov. 1, 2016 in a stabbing at Abbotsford Senior Secondary.
Second-degree murder conviction stands for Abbotsford school killer

Judge finds that Gabriel Klein is criminally responsible for death of Letisha Reimer

FILE – RCMP officers wearing face masks to curb the spread of COVID-19 stand by as protesters opposed to the Trans Mountain pipeline expansion block rail lines, in Burnaby, B.C., on Friday, November 27, 2020. THE CANADIAN PRESS/Darryl Dyck
‘Very scary’: B.C. travel rules too vague, shouldn’t involve police, civil liberties group says

BCCLA said that speaking with communities could have avoided top-down approach

Ocean Legacy Foundation members conduct a shoreline pollution cleanup in Vancouver. (OLP)
It’s time to end ‘suffocating’ plastic pollution along B.C. shorelines, advocates urge

This Earth Day, Ocean Legacy Foundation is launching a free educational platform to educate the public about plastic pollution

A teacher-librarian in Nanaimo was fired in 2019 for checking out an age-inappropriate graphic novel to a student. The discipline agreement was published Wednesday, April 21. (News Bulletin file photo)
B.C. teacher-librarian fired for checking out too-graphic graphic novel to student

Teacher had been previously disciplined and suspended on two occasions

Former University of Victoria rowing coach Barney Williams is photographed in the stands during the Greater Victoria Invitational at CARSA Performance Gym at the University of Victoria in Victoria, B.C., on Friday, November 29, 2019. THE CANADIAN PRESS/Chad Hipolito
Former B.C. university rowing coach ‘deeply sorry’ after complaints

Barney Williams says he’s been committed to ensuring no other member of the roster had a similar experience

Aria Pendak Jefferson cuddles ChiChi, the family cat that ran away two years ago in Ucluelet. The feline was missing until Courtney Johnson and Barry Edge discovered her in the parking lot of the Canadian Princess earlier this month. Aria and her parents were reunited with ChiChi in a parking lot in Port Alberni. (SUSAN QUINN/ Alberni Valley News)
B.C. girl’s wish granted as her cat came back, two years later

Courtenay family reunited with cat that went missing in Ucluelet in 2019

(Bandstra Transportation photo)
Smithers family-owned business institution sold to publicly-traded company

Bandstra Transportation and Babine Trucking acquired by Mullen Group

Most Read