Year's Maximum Pensionable Earnings (YMPE)

What Is Year's Maximum Pensionable Earnings (YMPE)?

The Canadian government sets the year's maximum pensionable earnings (YMPE) figure. The YMPE decides the maximum amount on which to base contributions to the Canada or Quebec Pension Plan (C/QPP). The YMPE determines the earnings amount that can be utilized in ascertaining pension contributions for every year.

Grasping Year's Maximum Pensionable Earnings (YMPE)

The Canada Pension Plan (CPP) decides the maximum earnings amount for what contributions to the Canada Pension Plan can be made. As per the Government of Canada, the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2020 are $58,700 — up from $57,400 in 2019. Benefactors who earn more than $58,700 in 2020 can't make extra contributions to the CPP.

Beginning in 2024, a separate contribution rate will be executed for earnings over the YMPE (expected to be 4% each for employers and employees).

Year's Maximum Pensionable Earnings and CPP Contributions

The Canada Pension Plan is like the Social Security program in the United States. It gives workers a series of regularly scheduled payments in retirement. The size of those payments relies upon an individual's earnings during their working years.

On June 20, 2016, Canada's priests of finance agreed to increase the CPP. The deal increased how much working Canadians would get from the CPP — from one-fourth of the employees' eligible earnings to one-third, with a lift to the earnings limit. Changes will be progressively eased in step by step more than seven years — from 2019 to 2025 — with the goal that the impact is estimated and piecemeal.

The enhancement has the following elements:

• The income replacement level will be raised to one-third of employees' income.
• The upper earnings limit is set at $82,700 for 2025.
• There will be a steady seven-year progressively work in, starting on January 1, 2019; this will comprise of a five-year contribution rate ease in below the yearly maximum pensionable earnings followed by a two-year ease in of the upper earnings limit.
• The Working Income Tax Benefit will increase to help low-income earners.
• The enhanced part of employee CPP contributions will be tax-deductible.

$58,700

The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2020.

The higher contribution rate on earnings below the YMPE ($58,700 in 2020) will be eased in over the initial five years. In 2023, the CPP contribution rate, as estimated by the Department of Finance Canada, will be one percentage point higher for the two 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 executed for earnings over the YMPE around then.

Features

• The size of those payments relies upon an individual's earnings during their working years, the age an individual beginnings accepting their pension, and how much and for how long an individual adds to the CPP.
• The CPP decides the maximum earnings amount for contributions to the CPP.
• The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2020 are $58,700.