Who contributes to the Canada Pension Plan?
Who contributes to the Canada Pension Plan?The Canada Pension Plan is funded by contributions from working Canadians and from investment revenue.
Your contributions to the CPP are based on how much you earn.
Who pays?
Just about every working Canadian over the age of 18 must pay into the Canada Pension Plan (or the Quebec Pension Plan if you work in the province of Quebec). You contribute every year until you retire — at age 60 at the earliest. In 2004, the maximum amount an employee pays is $1,831.50. Your employer matches your contributions. Your portion is deducted directly from your paycheque.
If you're self-employed, you pay both portions, making the payment at the time you pay your income tax. The amount you pay is based on net business income after expenses. In 2004, the maximum amount you would pay is $3,663.00. CPP contributions are paid only on your employment income. You don't have to include any other source of income such as Employment Insurance benefits, Worker's Compensation, investment income, and so on when calculating how much to pay in CPP contributions.
Did you work for different employers during the year?
You contribute to the CPP no matter how often you change jobs or where you work in Canada. Every employer is required to collect CPP contributions from each employee. The CPP keeps a record of all your contributions paid into the Plan over your working life, including those in the province of Quebec. Your Statement of Contributions provides you with the details of your contributions.
How are the funds spent?
Sixty-eight percent of funds in the CPP account go to retirement pensions. Sixteen percent go to survivor and death benefits, and 14 percent go to disability benefits. Less than two percent goes to administrative costs.
Do you plan to work abroad?
If you plan to work abroad, keep your pay stubs and tax slips. Canada currently has agreements with over 40 countries that may make you eligible for social security benefits in Canada and/or the other country.