The planned expansion of Canada’s retirement savings cornerstone, the Canada Pension Plan (CPP), officially took flight this week, with the first of several increases in workers’ annual CPP contributions.
Starting in 2019, CPP contribution rate increases will be phased in over the next seven years, ending in 2025. For this year, the contribution rate rises to 5.1% from 4.95% for employees, and to 10.2% from 9.9% for self-employed individuals. As a result, the estimated maximum annual contribution will rise to $2,749 from $2,594 for employees. For self-employed workers, the maximum annual contribution rises to $5,498 from $5,188.
The Canada Pension Plan Investment Board (CPPIB), which invests the CPP fund’s assets, states that it has designed an investment structure that aims to ensure fairness between the base CPP and enhanced CPP accounts.
“Over the past year, CPPIB has worked to ensure that both the base CPP and the additional CPP amounts will be managed efficiently and with a view to the opportunities that may be created as the CPP fund grows,” said Mark Machin, president & CEO of the CPPIB, in a release. “We will invest the additional stream of CPP with the same attention to appropriate growth, risk control and transparency that Canadians count on.”