What Is CPP (Canada Pension Plan)? A Guide 2025

Updated March 2025 · 8 min read

The Canada Pension Plan (CPP) is a mandatory government retirement program that nearly every working Canadian contributes to throughout their career. When you retire — or if you become disabled or die — CPP provides a monthly benefit to you or your family. It is one of the three pillars of Canadian retirement income, alongside Old Age Security (OAS) and personal savings.

Who Contributes to CPP?

Almost all employed and self-employed Canadians outside Quebec contribute to CPP. Quebec has its own equivalent program called the Quebec Pension Plan (QPP), which works similarly.

If you work for an employer, you and your employer each contribute equally to CPP every paycheque. If you are self-employed, you pay both the employee and employer portions — effectively double the rate of an employee.

CPP Contribution Rates and Limits for 2025

For 2025:

• Employee contribution rate: 5.95% of earnings between the basic exemption and the Year's Maximum Pensionable Earnings (YMPE)
• Employer contribution rate: 5.95% (matched)
• Self-employed rate: 11.9% total
• Year's Maximum Pensionable Earnings (YMPE): $71,300
• Basic exemption: $3,500 (first $3,500 of earnings is exempt)
• Maximum employee contribution: approximately $4,034 for 2025

Earnings above the YMPE are not subject to CPP contributions (base), though CPP2 contributions apply on earnings between the YMPE and the Year's Additional Maximum Pensionable Earnings (YAMPE) of $81,900 in 2025, at a rate of 4% each for employee and employer.

How CPP Benefits Are Calculated

Your CPP retirement benefit is based on:

• How much you contributed over your working life
• How many years you contributed
• Your average earnings over your contributing years
• The age at which you start collecting

The maximum CPP retirement benefit for someone starting at age 65 in 2025 is approximately $1,364.60 per month. However, the average Canadian actually receives significantly less — around $750–$850/month — because most people did not contribute the maximum throughout their entire careers.

When Can You Start CPP?

You can start CPP as early as age 60 or as late as age 70:

• Age 60 (early): You receive a reduced benefit — 0.6% less for each month before age 65, up to a maximum reduction of 36% at age 60
• Age 65 (standard): Full benefit based on your contributions
• Age 70 (delayed): You receive an enhanced benefit — 0.7% more for each month after age 65, up to a maximum increase of 42% at age 70

When Should You Take CPP?

This is one of the most important retirement decisions Canadians make, and there is no universal right answer. Consider:

• Take early (60–64) if: You have health issues reducing life expectancy, you need the income now, or you have high-interest debt to pay off
• Take at 65 if: You are retiring at 65 and need the income to cover expenses
• Delay to 70 if: You are in good health, have other income sources (RRSP, pension, part-time work), and want to maximize lifetime income. The breakeven point for delaying from 65 to 70 is typically around age 82–83 — if you live past that, you come out ahead by waiting.

CPP Disability Benefit

If you become severely disabled before age 65 and can no longer work regularly at any job, you may qualify for the CPP Disability benefit. To qualify, you must have made sufficient CPP contributions (generally 4 of the last 6 years) and have a severe and prolonged mental or physical disability.

The maximum CPP Disability benefit in 2025 is approximately $1,616/month, plus a flat-rate portion. The average payment is lower. When you turn 65, CPP Disability automatically converts to a CPP retirement pension.

CPP Survivor Benefits

CPP also provides benefits to surviving family members when a CPP contributor dies:

• Survivor's pension: Paid to the deceased's spouse or common-law partner. Amount depends on the contributor's CPP record and the survivor's age.
• Children's benefit: Paid to dependent children under 18 (or under 25 if in full-time education)
• Death benefit: A one-time lump sum of up to $2,500 paid to the estate

CPP Enhancement (CPP2)

Since 2019, the federal government has been enhancing CPP through additional contributions (CPP2). When fully phased in (by 2065 for someone retiring then), the enhanced CPP will replace one third of pre-retirement earnings up to a higher income ceiling — up from one quarter under the original CPP. Workers contributing throughout the enhancement period will receive significantly higher retirement benefits than previous generations.

How to Check Your CPP Entitlement

Log in to your My Service Canada Account at canada.ca. You can view your CPP Statement of Contributions, which shows every year of earnings and contributions on record, and get an estimate of your future CPP benefit at ages 60, 65, and 70.

Review this statement at least every few years to make sure your employer has been remitting CPP contributions correctly on your behalf.

CPP and Your Other Retirement Income

CPP is designed to replace only a portion of your pre-retirement income — roughly 25% for the original CPP, with the enhancement gradually increasing that. Most Canadians will need additional retirement income from:

• Old Age Security (OAS)
• RRSP/RRIF withdrawals
• TFSA withdrawals
• Workplace pension (if you have one)
• Personal savings and investments

CPP is a guaranteed, inflation-indexed base. Building on top of it through personal savings is the responsibility of every working Canadian.