Contributions to the Canada Pension Plan
With very few exceptions, every person over the age of 18 who works in Canada outside of Quebec and earns more than a minimum amount ($3,500 per year) must contribute to the Canada Pension Plan (CPP). If you have an employer, you pay half the required contributions and your employer pays the other half. If you are self-employed, you make the whole contribution.
No matter how often you change jobs or where you work in Canada, your contributions may help you or your family become eligible for:
At the age of 70, you no longer contribute to the CPP, even if you are still working.
Note: Quebec Pension Plan
The CPP operates throughout Canada, except in Quebec, where the Quebec Pension Plan (QPP) provides similar pensions and benefits.
How much do I contribute?
The amount you contribute is based on your employment income.
You make contributions only on your annual earnings between a minimum and a maximum amount (these are called your pensionable earnings). The minimum amount is frozen at $3,500. The maximum amount is set each January, based on increases in the average wage in Canada.
In 2015, the maximum amount is $53,600. The contribution rate on these pensionable earnings is 9.9 percent, split equally between you and your employer. If you are self-employed, you pay the full 9.9 percent. The maximum contribution for employers and employees in 2015 is $2,479.95 each.
If you are self-employed, the maximum contribution is $4,959.90. Your contributions are based on your net business income (after expenses). You do not contribute on any other type of income, such as investment earnings. If, during a year, you contributed too much or earned less than the set minimum amount, your contributions will be refunded when you file your income taxes.
Visit the Canada Revenue Agency website to find out more about CPP contribution rates, maximums and exemptions.
Why are my contributions important?
The Canada Pension Plan (CPP) uses your contributions to determine whether you and/or your family are eligible for a CPP benefit and, if so, what the amount of the benefit will be.
Important factors are how long and how much you contribute. In order to receive a CPP benefit, you must have worked and contributed in Canada (outside Quebec). Usually, the more you earn and contribute to the CPP in the years before you take your retirement pension, the higher the benefit will be, because you have built up more CPP pension credits.
Your CPP credits can also be affected if you divorce or separate from your spouse or if your common-law relationship ends.
How do I know that all of my contributions are accounted for?
The Canada Revenue Agency and Revenu Québec (for those working in Quebec) provide Service Canada with details on your earnings and the contributions you have made. Service Canada then keeps a record using a Statement of Contributions. You can check this statement for accuracy and contact us if you disagree with any of the figures.
You do not contribute while you are receiving a CPP Disability benefit, or during periods when you have no earnings or when your earnings are below the $3,500 minimum amount.
Note: Post-retirement benefit
If you work and make contributions while receiving your CPP retirement pension, these contributions will go toward the post-retirement benefit.
What if I lived or worked in another country?
Canada has international social security agreements with many countries. These agreements may help you qualify for pensions or benefits from Canada and/or from the other country if:
- you have worked in Canada and made at least one valid contribution to the CPP; and
- you have valid periods in a partner country that are creditable under the legislation of that country.
For example, if you did not live or work long enough in another country to qualify for benefits under its rules, your periods of contribution to the CPP or periods of residence in Canada under the Old Age Security Act may be combined with your periods that are creditable in the partner country. The combination may assist you in meeting the minimum eligibility requirements for pensions or benefits from the other country.
Similarly, if you do not meet the minimum contributory requirements to qualify for children’s, disability or survivors’ benefits under the CPP, a social security agreement can help you qualify by allowing you to combine your periods of contribution to the CPP with your periods that are creditable under the legislation of a partner country. Note that, while a social security agreement can help you to qualify for certain CPP benefits, the payment amounts will be based on your actual contributions to the CPP.
The requirements under the social security agreements vary from agreement to agreement. It is important to check the details of the agreement that relates to you.
What is my contributory period and how is it used?
Your contributory period begins when you reach age 18 (or January 1, 1966, whichever is later) and ends when you either start receiving your CPP retirement pension, turn 70 or die (whichever happens earliest).
We use the contributory period to calculate the amount of CPP benefits that you may become eligible to receive.
The amount you get considers periods where you had zero or low earnings. A certain number of your lowest earnings years may be automatically dropped from the pension calculation under the so-called "general drop-out provision".
You should also request the "child-rearing provision" if you had zero or low earnings because you were the primary caregiver raising your children.
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