CPP and OAS 2025: How Higher Contributions Could Boost — or Shrink — Your Retirement Paycheque

Canadians heading into 2025 will face some important changes to their retirement income system. Both the Canada Pension Plan (CPP) and Old Age Security (OAS) are seeing updates that promise bigger benefits over time, but they also come with steeper contribution requirements, especially for higher-income earners.

If you’re working, retired, or somewhere in between, knowing what’s about to change can help you make smarter money moves in the year ahead.

CPP Contribution Rates: Climbing Again

The CPP has been gradually expanding since 2019, with phased-in increases to both contribution rates and maximum pensionable earnings. In 2025, the next stage kicks in:

• Employees will pay 5.95% on earnings up to $71,300, with employers matching that amount.

• Self-employed individuals pay both portions — a combined 11.9% on that same income range.

On top of that, there’s now a second earnings tier. For income between $71,300 and $81,200, employees will contribute an additional 4%, while self-employed workers will add 8%.

That means higher deductions from paycheques, but it also means more money flowing into your future CPP benefits.

What It Means for Your Future CPP Payments

The expansion is designed to replace more of your pre-retirement income. By the time these changes are fully phased in, CPP will cover up to one-third of your lifetime average earnings, compared to just 25% before.

For context:

• In 2024, the maximum pensionable earnings were $69,700, and the top monthly CPP payout at age 65 was about $1,200.

• In 2025, that ceiling jumps to $79,400, with the maximum monthly benefit at age 65 expected to be around $1,300.

Over a full retirement, that difference could add up to thousands of extra dollars.

OAS in 2025: More for Seniors Over 75

OAS isn’t funded by contributions like CPP — instead, it’s paid from general tax revenue and adjusted every three months to keep up with inflation.

In 2025, the 10% permanent boost for seniors aged 75 and older continues, meaning:

• Ages 65–74 will get roughly $615 per month.

• Ages 75+ will see about $800 per month.

That inflation adjustment schedule — January, April, July, and October — ensures OAS keeps pace with the rising cost of living.

The OAS Clawback: Still a Factor for Higher Earners

For wealthier retirees, the OAS recovery tax (often called the clawback) is worth watching. If your net income is above $90,997 in 2024–2025, you’ll lose 15 cents of OAS for every dollar over that threshold.

Income planning — for example, controlling withdrawals from RRSPs or spreading taxable events across years — can help avoid or reduce this clawback.

Who Feels the Impact Most?

• Younger and mid-career workers: Will pay more into CPP now but benefit from higher payouts later. Pairing CPP contributions with Tax-Free Savings Accounts (TFSAs) can build additional, tax-free retirement income.

• Those close to retirement: Might benefit from delaying OAS until age 70, which boosts payments by 36%. Managing RRSP withdrawals strategically could also help avoid the clawback.

• Current retirees: Will continue to see quarterly OAS increases. Those over 75 get the added 10% bump.

Strategies to Get the Most from CPP and OAS

1. Consider delaying benefits – Waiting until age 70 can mean bigger monthly cheques for life.

2. Plan withdrawals smartly – Using TFSA funds in certain years can reduce taxable income and protect OAS from clawbacks.

3. Maximize CPP contributions – Especially for self-employed Canadians, making full contributions can lock in the highest possible benefit later.

4. Diversify savings – CPP and OAS form the foundation, but personal savings give flexibility for travel, healthcare, and emergencies.

Quick Answers to Common Questions

• Will CPP be higher in 2025?
  Yes. Maximum monthly CPP at age 65 will be around $1,300.

• What’s the OAS payment next year?
  About $615 (ages 65–74) and $800 (ages 75+).

• What’s the clawback limit?
  $90,997 in net income for 2024–2025.

• Should I delay OAS?
  Delaying until 70 increases your monthly amount by over one-third.

Final Takeaway

With CPP contributions and earnings limits rising — and OAS amounts adjusting — 2025 is shaping up to be a significant year for Canadian retirement income. Higher contributions might pinch today, but they could provide more stability and security in the years ahead.

Whether you’re just starting in your career or already enjoying retirement, reviewing your strategy now will help ensure that these changes work in your favour, not against you.