2024 Canada Pension Increase: Timing and Increment Details

Updated on March 3, 2024

The Canada Revenue Agency (CRA) has announced significant updates for the Canada Pension Increase in 2024. Notably, the Maximum Pensionable Earnings (MPE) for the Canada Pension Plan (CPP) will increase to CAD 68,500 from the 2023 level of CAD 66,600, starting January 1, 2024. This change allows Canadians to contribute more towards securing their retirement. While the cap on pensionable earnings rises, the base exemption level remains unchanged at CAD 3,500 for 2024. This means that only income exceeding this amount will be considered for calculating CPP payments. Stay informed about the Canada Pension Increase 2024, including the timing, contribution rates, and amounts.

2024 Canadian Pension Increment

A significant change in the Canada Pension indexing rate for 2024 is the introduction of a new earnings ceiling. Starting in 2024, a second, higher cap of CAD 73,200 will be in place. This will impact CPP contributions, known as CPP2, for earnings between CAD 68,500 and CAD 73,200. The computation of these new ceilings follows the CPP Act and considers the increase in average weekly income and salaries in Canada.

Contributing to the Canada Pension Plan during one’s working years allows Canadians to save for retirement effortlessly. However, it’s worth noting that changes in CPP payouts in 2024 and 2025 may surprise current workers, as a higher CPP deduction from each paycheck will fund the enhanced benefits.

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Introducing CPP2 Contributions

CPP2, short for additional supplementary Canada Pension Plan (CPP) payments, is based on an increased income cap of CAD 73,200 starting January 1, 2024. While the maximum regular CPP pensionable earnings remain at CAD 68,500 in 2024, an extra CPP2 payment is required if your earnings fall between CAD 68,500 and CAD 73,200. The CPP2 contribution system is introduced for the first time in 2024, with both employers and employees facing a 4.00% contribution rate and a maximum contribution of CAD 188.00 each.

2024 Canada Pension Increase Timing

In January 2024, Canada Pension is set to see a 4.8% increase. All pensions, including survivor pensions, undergo an annual cost-of-living adjustment (COLA) based on salary. This adjustment ensures that your pension maintains its value over time, protecting it from the impact of inflation.

The 4.8% increase is reflective of the entire rise in the Consumer Price Index (CPI) reported by Statistics Canada. The Board of Trustees has the discretion to grant COLAs based on the Plan’s financial status and other considerations. These adjustments may range from 0% to 100% of the CPI increase, but they are not guaranteed.

Calculating the January 1, 2024 Cost of Living Increase

By comparing the average Consumer Price Index (CPI) for the period of July 2022 to June 2023 with the average CPI for the period of July 2021 to June 2022, the cost of living adjustment (COLA) for January 1, 2024 was determined. As of January 1, 2023, the open group funded ratio was at 130.1%, which allowed the NBPSPP to grant Plan participants a cost of living adjustment (COLA) of 5.32%.

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In the future, the remaining 0.27% could be given out. The same approach is employed to get the average change in the national Consumer Price Index. was utilized under the pension scheme established by the Public Service Superannuation Act (PSSA). Additionally, it aligns with how COLA is calculated for various pension programs, such as the Canada Pension Plan.

What is the Consumer Price Index?

Statistics Canada calculates the Consumer Price Index (CPI) by assessing a weighted basket of products and services frequently purchased by Canadian consumers each month. The CPI serves as a widely-used tool for gauging fluctuations in the general consumer price level and tracking inflation rates.

Canada Pension Indexing Rate 2024

The NFAR receives annual information from the Treasury Board Secretariat, indicating the increase in pension indexing for federal public sector pensions effective January 1. The pension indexation rate for January 1, 2024, is 4.8%. Federal Retirees played a significant role in implementing pension indexation in 1970, and the Government of Canada website provides details on the calculation of this index.

Refer to the Pension Centre’s calendar to find out when your pension will be disbursed. If you encounter any issues with your pension payments or notice a payment delay according to the calendar, feel free to reach out to the Pension Centre using your preferred method of communication.

 

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