The income limits for contributing to the Canada Pension Plan (CPP) have been increasing for years, but 2024 will see big changes for middle-income earners.
“What’s different this year is the addition of a second tier to the pension system,” said Matt Davison, a professor of mathematics and statistical science at Western University.
The current CPP Tier 1 cap will rise to $68,500. The additional deduction for those who earn more is 4% of his income up to $73,200, but not more than $188 per year.
This applies to employers as well.
“Interest rates will rise, but people in the middle income bracket in particular will pay for longer because there will be a second threshold to pay at a lower rate,” said national director Cristina Santini. Ta. Affairs of the Canadian Federation of Independent Business (CFIB).
Mr Davison added that the government had gradually raised the threshold for CPP payments, but was now creating a second tier aimed at helping middle-income earners prepare for retirement.
“The reason is that Canadians struggle to save enough for retirement. And about 40 per cent of Canadians are genuinely worried that they will rarely have enough money for retirement. “There is,” he added.
Not only do employees receive more deductions, but employers must match the additional payments on top of increased payments for EI and other programs. Santini said these additional costs could hurt small businesses.
“For employers, this is like an increase in payroll taxes. It’s something they have to absorb as part of the cost of doing business. It’s something they have to pay whether they’re making a profit or not. ” she said.
“The extra allowance means middle-income earners will receive more payments from CPP when they retire, and that threshold is expected to rise over the years,” Santini added.