Come Jan. 1, Canada Pension Plan contributions are going up again, although higher than originally planned. The reason is largely because of the pandemic91裸聊视频檚 effect on the labour market, which has some groups noting the impact will be felt by some workers more than others.

Here91裸聊视频檚 a rundown of what91裸聊视频檚 happening, and how long the effect might last.

Why premiums are going up

The planned increase on Jan. 1 is part of a multi-year plan approved by provinces and the federal government four years ago to boost retirement benefits through the public plan by increasing contributions over time.

The first premium bump was in 2019, another was earlier this year and the next is due at the beginning of 2021.

A KPMG note in November said the maximum employer and employee contributions will hit $3,166 each in 2021, an increase from the $2,898 this year. For self-employed contributions, the maximum amount will be $6,332, up from $5,796.

Why next year is different

The plan requires contributions to go up alongside the upper limit on earnings that are subject to those premiums.

For next year, the earnings ceiling, known as the yearly maximum pensionable earnings or YMPE, was supposed to be $60,200, an increase of $1,500 from the 2020 limit. But the actual amount is going to be higher at $61,600.

The reason is due to the pandemic91裸聊视频檚 effects on the labour market and how the YMPE is calculated.

The formula to calculate the earnings limit relies on increases in the average weekly earnings recorded over the year ending June 30, compared to the same figure during the preceding 12-month period.

Over the course of the pandemic, average weekly earnings have increased, but not because people are earning more.

More lower-income workers lost their jobs between March and June than higher-wage workers meaning there were fewer low-wage workers as part of the calculation. The federal chief actuary91裸聊视频檚 office says that91裸聊视频檚 why the overall increase is larger than originally projected

The reaction

Dan Kelly, president of the Canadian Federation of Independent Business, estimates that anyone around the maximum earnings limit will effectively see a 9.3 per cent increase in premiums, beyond the just over five-per-cent bump baked into law.

91裸聊视频淭hat91裸聊视频檚 going to be hundreds of dollars of new CPP premiums out of paycheques of middle-income Canadians not because they got a raise, but because the formula has not had a COVID adjustment,91裸聊视频� Kelly says.

91裸聊视频淲e think this is deeply unfair.91裸聊视频�

Provincial finance ministers had asked the government to put a pause on increases for next year, pointing to the economic fallout from COVID-19, but that was easier said than done.

Any changes to contribution rates or the earnings ceiling at which point contributions top-out would need the approval of Parliament and seven provinces representing at least two-thirds of the national population 91裸聊视频� a higher bar than what91裸聊视频檚 required to amend the Constitution.

Bottom line

Contributions are going up next year. So too will the maximum earnings limit, beyond what was planned.

But federal officials expect the effect from the higher earnings limit to dissipate over time as jobs continue to come back after steep losses earlier in 2020.

Jordan Press, The Canadian Press

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