Contribution rates increase in 2012

December 21, 2011

The Ontario Teachers' Federation (OTF) and the Ontario government, the pension plan's sponsors, decided on a contribution rate increase to address Teachers' 2011 funding shortfall.

What are the new rates?

You will contribute an additional 1.1% of your salary to the Teachers' pension plan. The increase will be phased in over three years: 0.4% more in 2012, and 0.35% in each of 2013 and 2014. All increases go into effect with your first pay in January.

Year Up to CPP limit Above CPP limit Increase*
2011 10.4% 12.0% N/A
2012 10.8% 12.4% 0.4%
2013 11.15% 12.75% 0.35%
2014 11.5% 13.1% 0.35%
    Total increase 1.1%
* As a percentage of salary

What's the CPP limit?

The CPP limit is the maximum earnings on which CPP contributions and benefits are based. The limit, set annually by the Canada Revenue Agency, is $50,100 in 2012.

Contributions to the Teachers' pension plan are therefore based on two amounts:  contributions are lower on salary up to the Canada Pension Plan (CPP) a contributions and benefits limit, and higher on any salary above the CPP limit.

What's the bottom line?

For an average teacher earning $80,000, the 0.4% increase means an extra $320 in contributions in 2012. This will be partially offset by lower taxes because pension contributions are tax deductible.