Working Canadians contribute a percentage of their pensionable earnings to CPP every year. The amount of those earnings is, however, capped by a figure known as the maximum pensionable earning amount, and contributions on income amounts over that cap are not permitted.
The maximum pensionable earning amount for 2017 is$55,300.
If you earn less than that amount, you are contributing an amount to CPP which should provide you with a CPP retirement benefit which equals 25% of your average annual pensionable income during your working life.
If, however, your earn more than the maximum pensionable earnings, in any given year, you cannot make contributions on the “excess”. As such, your CPP benefit in retirement will fall short of the 25% income replacement goal.
The contribution rate in 2013 was 4.95% of pensionable earnings for the year and this amount will remain unchanged in 2017.
The basic exemption is unchanged at $3,500.
The maximum employer and employee contributions to the plan for 2017 will be $2564.10 each, and the maximum self-employed contribution will be $5128.20.
To find out about possible changes to CPP - read our Changes Ahead for The Canada Pension Plan? Blog