You may or may not be aware, but there are some changes coming to CPP in 2026. Now, some are pretty run-of-the-mill, but some are big and mark the end of the government's efforts to beef up the plan. Anyway, by the end of this video, you'll know exactly what's up. My name is Ree. I'm the founder of Well-Built Wealth. And if you've ever come across our channel before, you probably already know that we have a bunch of super easy to understand videos on how CPP works, including how much you can expect to get. So, we're not going to get too deep into all of that today. But that said, throughout the video, I will highlight a few of the key details just to make sure you know what you need to. Basically, the Canada Pension Plan or CPP is a governmentmandated pension plan that you pay into while you're working and draw from when you're retired. It's funded by contributions from both you and your employer. And if you're self-employed, well, congratulations. You get to pay both halves yourself. Now, the whole logic behind CPP is to replace a portion of the income that you are making while you were working once you retire. But it's not meant to, and it never was meant to, replace all of your income. It's just meant to be a solid base. And thanks to something called the CPP enhancement that started back in 2019, that base has been getting bigger every year. And 2026 marks a major milestone in that journey. But these enhancements don't apply to everybody. And even when they do apply, how much juice you'll actually get out of it totally depends. But more on that shortly. First, let's start with the change that affects everybody who is already collecting CPP, the inflation bump. In 2026, you are going to see a smaller increase in your CPP payments than you were probably hoping for. And that's because apparently inflation is cooling. See, every January, CPP payments are adjusted to keep up with the increases in the consumer price index. So, if the cost of living goes up, your CPP payment is supposed to go up, too. Now, over the last few years, those increases have been higher than normal. In 2023, we saw a 6.5% increase. In 2024, we saw a 4.4% bump and in 2025, it was 2.7%. Because inflation, as we know, was running pretty hot over that stretch. Now, you may be noticing that your brain is saying, "Wait a second. inflation was way higher than that. And you may be on to something. But before you make up your mind, you should probably listen to our government's official response on the matter. [Music] And there you have it. All is well. Regardless, the most recent inflation data, whether you trust it or not, says that inflation is low now. And so the CPP inflation bump for 2026 is set to be 2%. All right. Now, that's the story for everybody who's already collecting CPP. But as for everybody else, we have the second change. The full CPP enhancement kicks in. So this is the big one, the grand finale of a plan that started way back in 2019. In 2026, these enhancements that have been gradually rolled out over the last seven years are going to be fully locked and loaded. So, what does this actually mean? Well, before 2019, CPP was designated to replace about 25% of your average working income up to a certain limit. Under the enhanced CPP, that replacement rate grows to 33%, a third of your covered income. In plain English, in the future, CPP will replace more of your pre-retirement income than it used to. Now, this doesn't mean that everybody's automatically going to get more out of CPP. How much you actually get will still depend on how much you put into the plan and for how long you do that after these enhancements started in 2019. So, if you're a young person who ends up making these enhanced contributions for a full 40 years, your maximum CPP retirement benefit could be more than 50% higher than it was under the old system. And that's a pretty big deal, especially for younger Canadians who will work their entire career under these new rules. Now, of course, these extra benefits don't just come out of thin air. They come from people like you and your employer putting more money in to the plan. So, let's talk about that part. Now, CPP contributions. Before 2019, CPP contribution rates were pretty simple. You paid 4.95% of your income and your employer matched it for a total of 9.9%. And of course, if you were self-employed, you paid both. Since 2019, those contribution rates have been gradually increasing as part of the enhancement roll out. And in 2026, that phasein is complete. But now it's a little more complicated. There are now two parts to CPP contributions. the old school base CPP and the newer additional CPP. The base CPP covers your income up to the regular annual limit, which in 2026 was $74,600. This limit is called the year's maximum pensionable earnings or YMP if you want to be a nerd about it. Anyway, on this chunk of income, you have to contribute 5.95% versus the old 4.95% and so does your employer. But since 2024, there's now a second new layer called the additional CPP or CPP2, which provides additional coverage for higher income earners. In the future, they'll receive a higher benefit, but it also means that they'll have to contribute more, too, but only up to a certain limit. And yes, you guessed it. This new upper limit is called the year's additional maximum pensionable earnings. Y. And in 2026, that upper limit is 85 grand. Okay, that's a lot of acronyms. So, that's enough of that nonsense. The bottom line is this. In 2026, anything you earn up to $74,600, you have to pay 5.95% into CPP. And anything you earn between 74,600 and 85 grand, you have to pay a cut into the additional CPP now as well. But on the upper chunk, you only have to pay 4% instead of the 5.95% that you pay on the lower chunk. And yes, your employer has to kick in 4% on that upper chunk, too. So, it's a total of 8% going in. So, what does this mean for you? Well, if you're earning less than 74,600, then nothing really changes. You're just going to pay the same CPP rate that you were paying before. But if you earn more than that, then you're going to have to put more money into the additional CPP or CPP2 as they call it. And that of course means that you're going to have a little bit less take-home pay, but hopefully that leads to a bigger pension down the road. Change number four, increases to maximum pensionable earnings. As I touched on earlier, there are limits to how much of our income we have to make CPP contributions on every year. There's the base limit, the YMP, and now there's also the additional limit, the YAMP. Actually, I think I'm just going to call it Yampy going forward. Sounds totally stupid, but that's probably why I like it. Anyway, in 2025, the YMP limit was 71,300, but it is now jumping to 74,600 for 2026 due to inflation. And since that limit is going up, that also means that you will make CPP contributions on an extra $3,300 of your income if you make that much. And Yampy is going up too. It's jumping from 81,200 in 2025 to 85,000 in 2026. Now, so far I've been saying that you have to make contributions on all your income up to these limits, but that's not really true. I was just saying that to keep things simple. The fact is there is a small exemption. The first $3,500 you earn is exempt from any CPP contributions. So, you don't have to contribute on that part. So, there you go. Now you know. And the last one we're going to hit today is a variation on the previous contribution dollar amounts. Percentages are nice, but sometimes we actually just want to know the real dough. What are we actually paying? Well, for 2025, the maximum annual contribution to the base CPP was $4,3410 for both employees and employers. In 2026, that's rising to 4,23045 each. But that's just the base portion. If you're maxing out the additional CPP as well, well then of course the numbers get a bit bigger. For 2025, that max would have added an extra $396 in contributions for a total of $4,43010. And in 2026, maxing out that additional contribution will add an extra $416 for a total of $4,64645. And of course, if you're self-employed, then go ahead and double all those numbers since you're both the employee and the employer. So there you have it, all the changes in plain English. If you're already collecting, well, expect a smaller increase than you were probably hoping for. If you're still working and still contributing, well, you need to expect bigger contributions, but then hopefully a bigger pension down the road. And if you're self-employed, well, you saw the numbers.