Changing contribution rates today would require Parliamentary and provincial agreements. For those who contribute to the Canada Pension Plan, January 1 will feel like Groundhog Day. Contributions are increasing by more than expected this year, as they were last year, and the reason is the pandemic’s particular effects on the labour market.
The rise is part of a five-year plan authorised by provinces and the federal government to raise public pension benefits by boosting contributions over time. In 2019, the rises began.
According to a November note from KPMG, the maximum employer and employee contributions in 2022 will be $3,499 apiece, up from $3,166 this year. The maximum amount for self-employed contributions will increase from $6,332 to $6,999. Contributions must increase in tandem with the maximum bound on earnings subject to premiums under the pension plan.
The earnings cap for next year, known as the yearly maximum pensionable earnings or YMPE, was set at $63,700, up $2,100 from the 2021 level. However, the actual amount will be greater, at $64,900, representing a 5.3 percent increase, the greatest in three decades.
The reason for such rise is that the pandemic’s impacts on the labour market are still being seen. The earnings limit is calculated using a formula that examines average weekly earnings and compares changes over 12-month periods ending June 30. Because less people are working in lower-paying jobs as a result of the pandemic, average weekly wages have increased. Without them, the average growth looks to be much greater than it actually is.
Source: CBC News