Your Canadian Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions are determined, in part, by your pensionable earnings.
What are Pensionable Earnings?
Pensionable earnings are the amount of money that you make that is used to calculate how much you (and/or your employer) must contribute to your pension—specifically the Canada Pension Plan or Quebec Pension Plan. There is a basic exemption and a maximum on your pensionable earnings.
The basic exemption amount has remained the same as it was in 2019, at $3,500. This means that the first $3,500 you make in income does not count towards calculating the contribution amount of CPP or QPP you must remit.
There is also a maximum on pensionable earnings, of $58,700 for 2020. Any income you make over this amount also does not count towards calculating the contribution amount of CPP or QPP you must remit. In fact, you are not permitted to make additional contributions to the CPP to reflect any income that you make above the maximum.
If you are employed, you can find your pensionable earnings on Box 26 of your T4, and your contributions made to CPP in box 16. Your employer has remitted your contribution, and their matching contribution, to the CRA on your behalf.
What Is my CPP/QPP Contribution Rate for 2020?
Contribution rates are the percentage of your pensionable earnings that you need to remit for your CPP or QPP. Just like the pensionable earnings, these rates have changes in 2020. If you are an employee, your rate was 5.1% in 2019 and is now 5.25%. Your employer used to contribute an additional 5.1%, but their rate has been increased to match yours at 5.25%.
If you are self-employed your rate is also up from 10.2% to 10.5% because as a self-employed individual, you are responsible for both parts of the CPP contribution.
What are My Maximum Contributions for 2020?
There are maximum amounts you are allowed to contribute to the CPP or QPP. In 2020, the maximum employer and employee contribution is $2,898 each. This is an increase from 2019’s maximum employer and employee contribution of $2,748.90.
The self-employed maximum contribution to the CPP or QPP is $5,796, which is up from the 2019 maximum of $5,497.80.
