The CPP maximum pensionable earnings for 2022 will increase to $64,900

The CRA has announced the Canada Pension Plan (CPP) contribution limits for the upcoming year. The maximum pensionable earnings under the CPP for 2022 will increase to $64,900 (from $61,600). In addition, the employee and employer contribution rates for 2022 are set to rise to 5.7% (up from 5.45%) and the self-employed contribution rate will increase to 11.4% (from 10.9%).

As a result, the maximum employer and employee CPP contribution for 2022 will be $3,499.80 each, and the maximum self-employed contribution will be $6,999.60 (an increase from $3,166.45 and $6,332.90, respectively).

The basic exemption amount for CPP for 2022 remains at $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The increased contribution rates for 2022 follow the CPP enhancements enacted by the Canadian government in 2017 to gradually increase the maximum amount of CPP benefits that may be received during retirement once the changes are fully in place. These enhancements include five increases to CPP contribution rates that began in 2019 with the employee and employer contribution rates reaching 5.95% by 2023 (11.9% for the self-employed). The enhancements also include a new additional contribution rate of 4% for both employers and employees (8% for the self-employed) on earnings between the yearly maximum pensionable earnings limit and a new upper earnings limit starting in 2024.

source: KPMG TaxNewsNow Canada – November 9th, 2021 edition.