What is the Year’s Maximum Pensionable Earnings (YMPE)?
The Canadian government sets the Year’s Maximum Pensionable Earnings (YMPE). The YMPE determines the maximum amount on which to base contributions to the Canada or Quebec Pension Plan (CPP/QPP). The MGAP specifies the earnings amount that can be used in the calculation of pension contributions for each year.
Key points to remember
- The YMPE determines the maximum amount of earnings for CPP contributions.
- The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2022 is $64,900.
- The amount of these payments depends on a person’s earnings during their working years, the age at which a person begins to receive their pension, and the amount and duration of CPP contributions.
Understanding the Year’s Maximum Pensionable Earnings (YMPE)
The Canada Pension Plan (CPP) determines the maximum amount of earnings for which Canada Pension Plan contributions can be made. According to the Government of Canada, the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2022 is $64,900, compared to $61,600 in 2021. Contributors who earn more than $64,900 in 2022 cannot make additional CPP contributions.
Beginning in 2024, a separate contribution rate will be introduced for earnings above the YMPE (expected to be 4% each for employers and employees).
Annual Maximum Pensionable Earnings and CPP Contributions
The Canada Pension Plan is similar to the Social Security program in the United States. It provides workers with a series of monthly payments upon retirement. The amount of these payments depends on an individual’s earnings during their working years.
On June 20, 2016, Canada’s finance ministers agreed to increase the CPP. The agreement increased the amount Canadian workers would receive from CPP from a quarter of employees’ eligible earnings to a third, with an increase in the earnings cap. The changes will be phased in over seven years, from 2019 to 2025, so that the impact is measured and fragmented.
The improvement has the following features:
- The income replacement level will be increased to one-third of employee income.
- The upper earnings limit is set at $82,700 for 2025.
- There will be a seven-year phase-in, starting January 1, 2019; this will be a five-year phase-in of the contribution rate below the annual maximum pensionable earnings, followed by a two-year phase-in of the upper earnings limit.
- The Working Income Tax Benefit will increase to help low-income people.
- The enhanced portion of employee CPP contributions will be tax deductible.
Canada Pension Plan (CPP) maximum pensionable earnings for 2022.
The higher contribution rate on earnings below the YMPE ($64,900 in 2022) will be phased in over the first five years. In 2023, the CPP contribution rate, as estimated by the Department of Finance Canada, will be one percentage point higher for employers and employees on earnings up to the YMPE.
In 2024, a separate contribution rate (expected to be 4% each for employers and employees) will be introduced for earnings above the YMPE at that time.
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