The Canada Revenue Agency has announced that the maximum pensionable earnings under the Canada Pension Plan for 2016 will be $54,900, up from $53,600 in 2015. As such, contributors who earn more than $54,900 in 2016 aren’t required or permitted to make additional contributions to the CPP.
This new ceiling was calculated according to a CPP legislated formula that takes into account the growth in average weekly wages and salaries in Canada.
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Meanwhile, the basic exemption amount for 2016 remains $3,500. As well, the employee and employer contribution rates for 2016 will remain unchanged at 4.95%. And, the self-employed contribution rate will remain unchanged at 9.9%.
The maximum employer and employee contribution to the plan for 2016 will be $2,544.30 each, while the maximum self-employed contribution will be $5,088.60. Comparatively, the maximums in 2015 were $2,479.95 and $4,959.90, respectively.
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Facts to share with clients
- The CPP applies in every province and territory in Canada, with the exception of Quebec (where the Quebec Pension Plan provides similar pensions and benefits).
- Every employed Canadian over the age of 18 must contribute to the CPP or QPP to qualify for a retirement pension.
- Contributions to the CPP end when a contributor turns 70.
- The CPP provides retirement, disability and survivor benefits and pensions to contributors and their families.