Year's Maximum Pensionable Earnings (YMPE)

The year's maximum pensionable earnings (YMPE) is an annual government-imposed measure required for contributions and benefits to the Canada Pension Plan to ensure that all Canadian contributors and their families are protected in the event of loss of income due to retirement, disability or death. The year's maximum pensionable earnings refers to the amount of earnings used in calculating annual pension contributions. Annual changes to the year's maximum pensionable earnings are based on increases in average Canadian industrial wages. In 2022, the year's maximum pensionable earnings is at the level of $64,900. 

Year's Maximum Pensionable Earnings explained

The Canada pension plan (CPP) fixes the year's maximum pensionable earnings that can be contributed. CPP is an earnings-based social insurance program for all Canadians working in any Canadian province except Quebec. Based on the Canadian government data, the year's maximum pensionable earnings under the Canada pension plan for 2022 is $64,900, thus, this indicator has increased from the mark $61,600 in 2021.

If an employee has earned over the year's maximum pensionable earnings, their CPP contributions will stop when the limit is reached, and new CPP contributions will not start again until the following January. 

This system will undergo some changes in 2024, namely, earnings above the year's maximum pensionable earnings will be subject to a particular rate of contribution (predicted rate for employers and employees is 4%).

CPP Contributions and Year's Maximum Pensionable Earnings

The Canada pension plan currently covers earnings up to the year's maximum pensionable earnings threshold. This program is comparable to the US Social Security program, and the essence of this plan is to provide employees with a number of monthly payments after reaching pension age, the amount of which is directly dependent on how much a person has earned during the working years. Nevertheless, there are other important factors that must be considered - this is the age of an individual at the time of the start of receiving a pension, the time interval during which contributions to the CPP were made, as well as their size.

On June 20, 2016, the Canadian Department of Finance made a decision to enhance the CPP. The accepted enhancement was developed in order to increase pension incomes for the next generation of elderly people, and was also designed to help families to plan their optimal retirement savings. 

A decision also was made to increase contribution rates over a seven-year period, starting on the first calendar day of 2019. The changes also allowed for an increase in the amount that Canadians who work would gain from the Canada pension plan to one-third with an increase in the earnings cap (the previous figure was one-fourth of a worker's eligible earnings). By 2025, the upper bar of earnings will be reached and will amount to $82,700, that is, the increase in the year's maximum pensionable earnings subject to the CPP will be increased.