Canada Pension Plan Updates And Changes 2020 – Interesting changes and updates to the CPP were announced in 2018,when the finance ministers met, and these changes were implemented in 2019. The updates were added to the previously announced changes that effected the contribution rates along with increasing the CPP pay outs going forward.
Unlike the future CPP enhancements and expansion that was announced in the year 2016, the latest changes are aimed at Canadians that have taken time out from work due to raising children, disabilities, death benefits, and survivor-benefit beneficiaries. These latest updates are not predicted to increase CPP contribution rates.
The New CPP 2020 Updates
From January 2019, the CPP contribution rate increased from 4.95% to 5.1%. This translates into a annual CPP contribution rate that will increase to 10.20% (your employer’s contribution + your contribution) of your overall pensionable earnings. The self-employed individuals are responsible for the paying the full contribution rate.
In the year 2020, contribution rates will increase to 5.25% or 10.50% combined.
The CPP contribution rates are predicted to carry on climbing every year until 2023, when they will level at 5.95% (or 11.90% combined). Refer to the table displayed below for these rates.
The Last CPP Updates
Child Rearing And Drop-in Provisions
In previous years the “drop-out” provisions permitted individuals to “drop-out” a maximum of 8 years of their zero or lowest income years when working out the maximum CPP pension they could qualify for. With the latest “drop-in” provision, the higher incomes are taken into account for this period and then used to work out retirement benefits. This will more than likely increase CPP retirement benefits for the individuals affected.
– Disability: If you were not able to return to work from a disability, the latest formula uses 70% of your “average earnings”, from the previous 6 years before you experienced the disability.
– Child Rearing: If you left work in order care and raise children under 7 years of age, the latest formula uses the average income you earned from the previous 5 years.
Under the latest rules, individuals are only able to get the maximum from CPP survivor benefits when they are 65 years old or older. Between 45 and 64 years of age, the survivor benefits will be far lower and will carry on decreasing until zero at the age of 35.
The latest changes will mean that a survivor will receive benefits regardless of how old they are, children, or their disability. The applicants that were once rejected under previous rules are allowed to re-apply in the year 2019, when these latest changes are implemented. Around 40,000 individuals are predicted to benefit when it comes to these latest updates.
The CPP Death Benefit involves a single payment to an estate of the deceased CPP contributor. Under the latest rules, the amount payable for the death benefit is a maximum amount of $2,500. This amount will be prorated according to how many years or months the deceased had contributed toward the CPP.
With the latest updates, death benefits are set at the $2,500 flat rate, and will not be prorated any longer on the CPP contributions or earnings of the person that passed away. A number of groups have attempted to try and persuade the government into increasing this benefit to $3,580 in order to match up to the increasing prices of funeral costs. It is apparent that this will not change with the latest changes and updates.