Canada Pension Plan (CPP) FAQ

Canada Pension Plan (CPP) contributions are deducted from pensionable wages from the age of 18 until the age of 70.

The Canada Pension Plan provides most working Canadians, or their survivors, with benefits when they retire, become disabled, or pass away.

Contribution Rates

Each year maximum pensionable earnings are established and a basic personal exemption of $3,500 is applied.

The difference between pensionable earnings and the exemption is calculated as contributory earnings. Contributory earnings multiplied by the contribution rate determines the contribution amount deducted each year. Employees that earn more than the maximum contribution only contribute the maximum annual contributions amount each year ($3,754.45 for 2023).

Canada Pension Plan Contribution Rates 2023 2024 2024
Year's Additional Maximum Pensionable Earnings     $73,200.00
Annual Maximum Insurable Earnings $66,600.00 $68,500.00 $68,500.00
Annual Basic Exemption $3,500.00 $3,500.00 N/A
Contributory Earnings (Maximum) $61,500.00 $63,200.00 $4,700.00
Contribution Rate 5.95% 5.95% 4.00%
Annual Maximum Employee Contribution $3,754.45 $3,867.50 $188.00
Annual Maximum Employer Premium $3,754.45 $3,867.50 $188.00

The impact on pay each January

Each calendar year CPP contributions must be deducted from earnings until the maximum contribution is reached. When this happens employees will notice that CPP deductions are no longer being withheld, resulting in a slightly higher net pay.

When deductions begin again in January of the following year, net pay lowers as a result.

CPP Program Enhancements

Changes to CPP are being implemented by the CRA over seven years from 2019 through 2025 in two phases:

Phase 1: Increased employee and employer contributions as follows:

  • The contribution rate will rise from 4.95% to 5.95% over five years (2019 – 2023) on the Yearly Maximum Pensionable Earnings (YMPE)

Phase 2: A new Additional Yearly Maximum Pensionable Earnings (AYMPE) value will be introduced; targeted to be $80,900 by 2025.

The upper earnings limit will be phased in over two years (2024 – 2025):

  • In 2024 AYMPE will be approximately 7% above YMPE.
  • In 2025 AYMPE will be approximately 14% above YMPE.

An expected contribution rate of 4% on enhanced earnings (the difference between AYMPE and YMPE) will apply.

The Canada Revenue Agency (CRA) has indicated that the $3,500 annual CPP exemption will continue to apply, on a pay period basis, to the YMPE but not to AYMPE.

Tax Treatment of Proposed CPP Enhancement

The employee contribution to the enhanced CPP is tax-deductible. A tax break is provided for lower-income workers under the Canada Workers Benefit (CWB).

Tax Deductibility of Enhanced CCP Contributions

The previous employee CPP contribution of 4.95% of pensionable income forms part of the value on which a tax credit is calculated, using the lowest tax rate (federal rate is 15%). This tax credit will continue to apply to the 4.95% contributions on each year’s YMPE value. Contributions associated with the enhanced portion of CPP will be treated as tax-deductible, similar to registered pension plan contributions. The enhanced portion will include the additional 1% contribution on YMPE as well as the 4% contribution on additional earnings up to the AYMPE.

Details of these changes and why they are being made are available on the CRA website.

Opting out of CPP

You cannot opt out of CPP contributions unless you are at least 65 years of age and receiving a CPP retirement pension.

Employees aged 65 to 70

As per existing legislation, CPP contributions stop on the last pay of the month before you begin receiving a CPP/QPP retirement pension. Effective under the new legislation, Payroll must deduct CPP contributions from your pensionable wages unless you opt out.

Employees in this age bracket may choose not to make CPP contributions by completing the form, CPT30: Election to Stop Contributing to the Canada Pension Plan. You must file the CPT30 election form with UBC Payroll and the Canada Revenue Agency. No CPP contributions will be deducted on pay dates following the month the form is filed. 

If you choose to make CPP contributions, no action is required from you. In the event you apply for CPP and wish to stop making CPP contributions, please return the completed CPT30 form by mail or in person to UBC Payroll at:

  • UBC Vancouver: TEF 3, 5th Floor, 6190 Agronomy Road, Vancouver, BC, V6T 1Z3
  • UBC Okanagan: OM1 - 1157 Alumni Avenue, Kelowna, BC Canada V1V 1V7

If you wish to restart CPP contributions in the future, a new CPT30 form must be filed to revoke a previous election to change your contribution status at that time. The CPT30 form can only be used once per calendar year. For example, if you file the CPT 30 election form in 2023 to stop deductions, you may not file a CPT30 revocation again to restart deductions until 2024.

If you are in this age bracket but not receiving a CPP/QPP retirement pension, there is no change. Payroll will continue to deduct CPP contributions from your earnings.