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Payroll deduction highlights new CPP agreement

Jun 22, 2016 | 10:00 AM

The new $7 Canada Pension Plan deduction starting each month in 2019 should be kept in mind, says a Battlefords financial advisor.

New changes to CPP were agreed upon on Monday by the federal government and eight out of 10 provinces; including Saskatchewan.

Certified Financial Advisor with Hein Financial Group in North Battleford, Janaye Chubb, said the biggest takeaway for people are the increases in payroll deductions and expenses. The system is designed so each generation of workers pays for its own retirement and Chubb said this will have a great impact on future retirees.

“Those that are, say, 10 years out from retirement, those are the people that really need to make sure their plan is integrating the new rules and any financial plans. It’s going to be a change and it’s just something that needs to be accounted for,” she said.

People earning roughly $55,000 a year will see an additional $7 a month taken in payroll deductions. By 2023, these are going to increase to $34 a month. Because of these deductions, more money will be available once a person reaches retirement age and begins to receive a pension. The income replacement rate was increased from one-quarter to one-third, meaning the maximum benefit will be roughly $17,478 instead of $13,000.

According to Chubb, the CPP doesn’t offer as much flexibility as some self-implemented saving strategies and it isn’t the “be all end all” of retirement money.

“There’s more that needs to be done depending on your retirement lifestyle, how you want to live your life, how you want to enjoy your retirement years,” Chubb explained. “That all comes into play and working with that financial planner really ensures that your retirement is secure based on how you want it to be.”

–With files from The Canadian Press.

 

mkelly@jpbg.ca