CPP2 refers to the second additional contribution under the Canada Pension Plan enhancement. It was introduced as part of a phased expansion to increase future retirement benefits for Canadians.
How It Works
As of 2024, employees and employers must contribute an extra percentage on earnings above the regular CPP maximum (called the Year’s Maximum Pensionable Earnings, or YMPE) up to a new higher limit (called the second earnings ceiling). This is in addition to the base CPP contribution.
Why It Matters
- Higher benefits: CPP2 increases future retirement payouts for those who contribute.
- Shared cost: Both employees and employers contribute, while self-employed pay both portions.
- Gradual rollout: CPP enhancements are phased in to balance affordability with long-term benefits.
Final Thoughts
CPP2 is designed to strengthen retirement income security for future generations. While it increases contributions today, it ensures Canadians receive larger pensions in retirement.