2025-01-20
CPP Contributions Explained: CPP1 and CPP2 for 2025
Everything you need to know about Canada Pension Plan contributions in 2025, including the new CPP2 enhanced tier and how contributions affect your retirement benefit.
The Canada Pension Plan (CPP) is Canada’s contributory retirement pension system. Since 2024, CPP has two tiers: CPP1 (the original plan) and CPP2 (an enhanced additional tier).
CPP1 — The Original Tier
For 2025:
| Parameter | Amount |
|---|---|
| Employee rate | 5.95% |
| Employer rate | 5.95% (matches employee) |
| Basic Exemption | $3,500 |
| Year’s Maximum Pensionable Earnings (YMPE) | $71,300 |
| Maximum annual contribution | $(71,300 - 3,500) × 5.95% = $4,034.10 |
Your CPP1 contribution = (Employment Income − $3,500) × 5.95%, up to the maximum.
CPP2 — The Enhanced Tier
CPP2 was introduced in 2024 to provide a higher replacement rate on earnings above the YMPE:
| Parameter | 2025 Amount |
|---|---|
| CPP2 rate | 4% |
| Earnings range | $71,300 – $81,200 |
| Maximum CPP2 contribution | $(81,200 - 71,300) × 4% = $396.00 |
Maximum Total CPP Contribution (2025)
- CPP1 max: $4,034.10
- CPP2 max: $396.00
- Total max: $4,430.10
Who Pays CPP?
All employed Canadians under 70 with employment income above $3,500 must contribute. Self-employed individuals pay both the employee and employer portions (11.9% for CPP1, 8% for CPP2) but can deduct the employer half.
Quebec residents pay into the Quebec Pension Plan (QPP) instead of CPP. QPP has similar rates but is administered by Revenu Québec.
CPP Benefits
In retirement, CPP provides monthly income based on your average earnings and years of contributions. The maximum CPP retirement pension at age 65 is approximately $1,433/month (2025). CPP2 contributions build additional benefits on top of CPP1.
Planning Considerations
- Deferring CPP to age 70 increases your monthly benefit by 42%
- Taking CPP at 60 reduces it by 36%
- CPP contributions generate a non-refundable federal tax credit and a deduction (for the enhanced CPP2 portion)
Use our calculators to apply these concepts to your own income. Tax information is for general guidance only — consult a CPA for advice specific to your situation.