Year’s Maximum Pensionable Earnings (YMPE)

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Year’s Maximum Pensionable Earnings (YMPE)

Overview

The Year’s Maximum Pensionable Earnings (YMPE) is the annual earnings cap used to determine the maximum amount on which contributions to the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) are calculated. It sets the upper limit for pensionable earnings in a calendar year and therefore affects both contribution limits and the earnings base used to calculate future CPP/QPP benefits.

Key takeaways

  • YMPE sets the maximum earnings used to calculate CPP/QPP contributions and benefits.
  • For 2022, the YMPE was $64,900.
  • Changes to the CPP introduced higher replacement and phased-in contribution rules between 2019 and 2025, including a separate contribution rate for earnings above the YMPE beginning in 2024.
  • Actual CPP benefits depend on lifetime earnings, contribution history, and the age at which you start receiving benefits.

How YMPE works

  • Employers and employees make CPP/QPP contributions on earnings up to the YMPE. Earnings above the YMPE are not subject to the standard contribution rate.
  • The YMPE also serves as an upper bound when calculating the portion of earnings used to determine pension benefits. Higher lifetime pensionable earnings (up to the YMPE each year) generally produce larger CPP/QPP retirement benefits.
  • Quebec administers the QPP, but the YMPE concept applies to both CPP and QPP.

CPP enhancement and its effect on YMPE and contributions

In 2016 federal and provincial finance ministers agreed to enhance the CPP to increase retirement income replacement. Key elements of the enhancement, phased in from 2019 to 2025, include:

  • Increase in the income replacement level from one-quarter (25%) to one-third (33%) of eligible earnings.
  • A phased, seven-year implementation (2019–2025): a five-year phase-in of higher contribution rates on earnings up to the YMPE, followed by a two-year phase-in of an upper earnings limit for the enhanced portion.
  • An upper earnings limit for the enhanced portion set at $82,700 for 2025.
  • Beginning in 2024, a separate contribution rate applies to earnings above the YMPE (the enhanced-rate portion); estimates indicated this separate rate would be about 4% for employers and 4% for employees.
  • The enhanced portion of employee contributions is tax-deductible.
  • Additional measures to support low-income earners (e.g., adjustments to related tax/benefit programs).

Recent and transitional details

  • 2022 YMPE: $64,900. Contributors earning more than this amount in 2022 could not make additional standard CPP contributions on amounts above the YMPE for that year.
  • Contribution-rate increases for the enhanced CPP were phased in incrementally; for example, in 2023 the contribution rate on earnings up to the YMPE was higher than prior years as part of the phase-in.
  • From 2024, a distinct contribution rate applies to the portion of earnings above the YMPE (the enhanced portion), increasing total contributions for higher earners until the 2025 limits fully take effect.

What this means for workers

  • If you earn at or below the YMPE, your standard CPP/QPP contributions are calculated on your full salary up to that cap.
  • If you earn above the YMPE, under the post-enhancement rules you may pay additional contributions on the enhanced portion of earnings (subject to the phased-in upper limit).
  • Your eventual CPP/QPP retirement benefit is based on your pensionable earnings history (capped by the YMPE each year), how long and how much you contributed, and the age you begin collecting benefits.

Practical steps

  • Check the current YMPE each year to understand your contribution ceiling and how much income counts toward CPP/QPP benefits.
  • If you have significant earnings above the YMPE, be aware of enhanced contribution rules and how they affect take-home pay and future benefits.
  • Consider CPP/QPP alongside other retirement savings (registered retirement plans, personal savings) when planning retirement income.