The Canada Pension Plan (CPP) is one of the most important retirement income sources available to working Canadians. Yet many people don't fully understand how their benefit is calculated, when to start it, or how the CPP enhancement affects future retirees. This guide explains everything you need to know about CPP in 2025.
The Canada Pension Plan is a mandatory, contributory, earnings-related social insurance program. Most employees and self-employed Canadians contribute to CPP throughout their working life. In return, they receive a monthly retirement benefit, as well as disability and survivor benefits if needed.
Quebec has its own equivalent program, the Quebec Pension Plan (QPP), which operates similarly but with some differences in contribution rates and benefit structures.
Your CPP retirement benefit is based on:
The maximum benefit assumes you contributed at the maximum level for at least 39 years (with dropout provisions that remove your 8 lowest-earning years). The YMPE for 2025 is approximately $68,500. Self-employed workers pay both employee and employer contributions — effectively double the rate of employees.
| Contributor | Rate | Max Contribution (approx.) |
|---|---|---|
| Employee | 5.95% | ~$3,867/year |
| Employer | 5.95% | ~$3,867/year |
| Self-employed | 11.9% | ~$7,735/year |
There is also a CPP2 contribution (the second additional CPP) on earnings between the YMPE and the Year's Additional Maximum Pensionable Earnings (YAMPE), which is approximately $73,200 in 2025. The CPP2 rate is 4% for both employees and employers.
You can start CPP any time between ages 60 and 70. Each choice has a permanent impact on your monthly benefit:
| Start Age | Adjustment | Approx. Monthly (2025 max) |
|---|---|---|
| 60 | -36% (7.2%/year × 5 years) | ~$873/month |
| 61 | -28.8% | ~$971/month |
| 62 | -21.6% | ~$1,069/month |
| 63 | -14.4% | ~$1,167/month |
| 64 | -7.2% | ~$1,267/month |
| 65 | No adjustment | ~$1,364/month |
| 66 | +8.4% | ~$1,479/month |
| 67 | +16.8% | ~$1,593/month |
| 68 | +25.2% | ~$1,708/month |
| 69 | +33.6% | ~$1,822/month |
| 70 | +42% | ~$1,936/month |
The "break-even" point for deferring CPP from 65 to 70 is approximately age 82–84. If you expect to live into your mid-80s or beyond, deferral is generally advantageous.
CPP retirement income is fully taxable at your marginal rate. It is reported on a T4A(P) slip. CPP does not qualify for the pension income credit (that applies to RRIF and DB pension income), but it is not subject to OAS clawback either. If you have a spouse with lower income, CPP income cannot be split directly, though you can apply for CPP pension sharing if both spouses are receiving CPP.
If both you and your spouse/common-law partner are over 60, you can apply to share CPP retirement pensions. The combined amount is split equally between both partners for tax purposes, potentially reducing the higher-earning partner's tax. This is different from pension income splitting under the Income Tax Act.
If you are receiving CPP and continue to work, you and your employer must continue contributing to CPP until age 65 (after 65 you can opt out). These extra contributions earn you the Post-Retirement Benefit (PRB), which is a small additional monthly amount added to your CPP each year you contribute.
CPP is not just a retirement program. It also provides:
Since 2019, CPP contributions and benefits have been gradually increasing. The original CPP was designed to replace 25% of eligible earnings. The enhanced CPP will eventually replace 33.33% of eligible earnings. Workers who contributed to enhanced CPP throughout their careers (mainly those currently under 45) will see meaningfully higher benefits than today's retirees receive.
In retirement, every dollar matters. KOHO offers free banking with no monthly fees and no minimum balance. Use code 45ET55JSYA for a bonus when you open your account.
Open KOHO Free — Code 45ET55JSYAApply through Service Canada online via My Service Canada Account, by mail, or at a Service Canada office. Apply at least 6 months before you want payments to begin. Payments are made monthly, with the first payment typically arriving the month after your start date.
You can check your CPP Statement of Contributions at any time through My Service Canada Account to verify your contribution history and get an estimate of your future benefit.