Canada Pension Plan (CPP) overview

The Canada Pension Plan, or CPP for short, is a savings plan that helps Canadian workers save for retirement. Those who qualify for it receive a monthly taxable income cheque from the government that is designed to replace part of your income when you retire. In order to receive CPP, you must be 60 years or older and have made at least one valid contribution. A valid contribution would be considered anything put into the account from your employer or as a result of a separation agreement when a marriage or common-law relationship dissolves. A small percentage of every pay cheque is put into your CPP account and is considered part of your annual earnings. In order to receive CPP, you must apply for it when you are nearing the end of your career. You want to make sure you have enough time for your paperwork to be processed so that you do not go a few months without payment. It takes 7 – 14 business days for online forms to be processed, whereas if you go in person or mail in the application, it can take up to 120 days. Having a clear timeline for your retirement can be crucial when applying for the Canada Pension Plan. The amount of money you get each month is based on your average monthly earnings, contributions made to your CPP and the age you retire at. For example, if you decide to retire at 60, you will get a lower monthly payment than if you wait until you are 70. Past the age of 70, however, there is no longer any advantage to waiting longer, as the monthly amount does not increase if you retire beyond that age.

Employment Insurance overview

Employment Insurance is available to workers who have lost their job or have to stop working due to:

• pregnancy
• illness
• caring for a newborn or newly adopted child
• being critically ill or injured
• having a family member with a serious illness or at risk of death
• upgrading their skills

EI is intended to provide temporary income support for those who need it. In order to qualify to receive EI, you must have paid your premiums in the past year and be in any of the above situations. If you are self-employed, you can also claim EI in these situations if you have independently paid into the program.

2021 rates

There have been extensive changes to both the Canada Pension Plan and Employment Insurance rates this year due to the Covid-19 pandemic. It is important for you to know about these changes so that you can be sure to implement them correctly. The following changes were made to the CPP rates for 2021:

• yearly maximum pensionable earnings increased to $61,600
• contribution rate increased to 5.45% of yearly income
• maximum employee/employer contributions: $3166.45
• maximum contribution for self-employed: $6332.90

Québec has its own system, called the Québec Pension Plan (QPP). These are the QPP rates for 2021:

• yearly maximum pensionable earnings increased to $61,600
• contribution rate increased to 5.90% of yearly income
• maximum employee/employer contributions: $3427.90
• maximum contribution for self-employed: $6855.80

By increasing the rates for the CPP and QPP, the federal and Québec governments have allowed workers a similar level of retirement compensation despite the economic downfall. EI contribution rates did not change for 2021 at a federal level, but the annual maximum insurable earnings increased from $54,200 to $56,300. In Québec, however, EI contribution rates actually reduced in 2021, with employees now paying 1.18% (down from 1.20% in 2020) and employers now paying 1.652% (down from 1.680% in 2020). In general, a lot has changed this past year for both CPP and EI contribution rates due to the economic impact of the COVID-19 pandemic. These changes may well continue as the economy continues to adjust to the new normal. Related articles: Navigating to a Remote Workforce During the COVID-19 Outbreak A Business Owner’s Guide for Keeping Customers and Clients Safe During COVID-19