Canada Pension Plan premiums are going up more than planned. Here’s what we know

Like last year, contributions are going up again by more than originally planned, and the reason again lies with the unique impacts of the pandemic on the labour market.

Jan. 1 is going to feel like Groundhog Day for all those paying into the Canada Pension Plan. Like last year, contributions are going up again by more than originally planned, and the reason again lies with the unique impacts of the pandemic on the labour market.

Here’s a rundown of what’s happening.

The increase is part of a multi-year plan approved by provinces and the federal government five years ago to boost retirement benefits through the public plan by increasing contributions over time. The rises started in 2019.

A KPMG note in November said the maximum employer and employee contributions will hit $3,499 each in 2022, an increase from the $3,166 this year. For self-employed contributions, the maximum amount will be $6,999, up from $6,332.

The pension 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 $63,700, an increase of $2,100 from the 2021 limit. But the actual amount is going to be higher at $64,900, for a 5.3 per cent increase that is the largest in three decades.

The reason is due to the pandemic’s lingering effects on the labour market.

The formula to calculate the earnings limit looks at what people are earning on average each week, and compares changes between 12-month periods that end June 30.