CPP (Canada Pension Plan)
CPP is a contributory, earnings-related social insurance program that provides retirement, disability, and survivor benefits. Both employees and employers contribute 5.95% of pensionable earnings between the basic exemption ($3,500) and the Year's Maximum Pensionable Earnings (YMPE, $74,600 in 2026, up from $71,300 in 2025). Self-employed individuals pay both portions (11.90%).
Starting in 2024, CPP2 introduced a second ceiling for higher earners. Earnings between the first ceiling ($74,600 in 2026) and the second ceiling (the YAMPE, $85,000 in 2026, up from $81,200 in 2025) are subject to an additional 4% contribution from both employees and employers. CPP2 expands future retirement benefits for those who contribute above the first ceiling.
You can start receiving CPP retirement pension as early as age 60 (at a reduced rate) or defer it until age 70 (at an increased rate of 0.7% per month of deferral after 65). The standard age is 65. Your benefit amount depends on how much and how long you contributed. The maximum monthly benefit at age 65 is approximately $1,507.65 in 2026 (up from $1,433.00 in 2025 and $1,364.60 in 2024).
How it works
Both you and your employer contribute 5.95% of your pensionable earnings between the basic exemption of $3,500 and the Year's Maximum Pensionable Earnings, so contributions stop for the year once your earnings reach that ceiling. If you're self-employed, you're on the hook for both portions, meaning an effective rate of 11.90% on the same band of earnings, which is a significant cash-flow item to plan for.
Since 2024, a second tier called CPP2 applies an additional 4% contribution, from both employee and employer, on earnings between the first ceiling (the YMPE) and a second, higher ceiling (the YAMPE). This tier expands the retirement benefit for higher earners rather than simply taxing the extra earnings with no future payout.
You can start your CPP retirement pension anywhere from age 60 to age 70. Starting before 65 permanently reduces your monthly amount, while deferring past 65 increases it by 0.7% for every month you wait, up to age 70. Quebec workers contribute to the Quebec Pension Plan instead, administered by Revenu Quebec, using a similar structure with its own rate schedule.
Example: CPP contributions on a $80,000 salary
On $80,000 of pensionable earnings, the base CPP contribution applies to earnings between the $3,500 exemption and the YMPE. That's $80,000 minus the portion above the YMPE ceiling, leaving pensionable earnings taxed at 5.95%, working out to roughly $4,230 in base CPP contributions for the year.
Because $80,000 exceeds the first ceiling, the amount above it is also subject to the CPP2 top-up at 4%. That additional band adds a further contribution on top of the base amount, so your total CPP withholding for the year is higher than the base calculation alone would suggest.
Frequently asked questions
Can self-employed people opt out of CPP?
No, self-employed individuals must contribute, but they pay both the employee and employer portions themselves, for a combined rate of 11.90% on pensionable earnings.
What is CPP2?
It's a second contribution tier introduced in 2024 that applies an extra 4% on earnings between the standard CPP ceiling and a higher second ceiling, expanding future retirement benefits for higher earners.
Should I start CPP at 60 or wait until 70?
Starting early permanently reduces your monthly pension, while deferring past age 65 increases it by 0.7% per month of delay, so the right choice depends on your health, other income, and how long you expect to need the benefit.
Related Terms
EI (Employment Insurance)
Employment Insurance provides temporary income support to Canadian workers who lose their jobs through no fault of their own, are sick, are pregnant, or are caring for a newborn or adopted child.
QPIP (Quebec Parental Insurance Plan)
QPIP is Quebec's parental insurance plan providing maternity, paternity, parental, and adoption benefits to eligible Quebec workers.
T4 (Statement of Remuneration Paid)
The T4 slip is issued by employers to employees by the last day of February each year.