The Year’s Maximum Pensionable Earnings (YMPE) is the annual earnings limit set by the government for contributions to the Canada Pension Plan (CPP) and Québec Pension Plan (QPP). It determines the maximum income on which CPP and QPP contributions are calculated.
How It Works
Each year, the government sets the YMPE based on the average wage in Canada. Employees and employers contribute a percentage of income up to the YMPE. Income above this amount is not subject to base CPP/QPP contributions.
Why It Matters
- Contribution limit: Caps how much income is subject to CPP/QPP contributions.
- Benefit calculation: Pension benefits are based partly on contributions up to the YMPE.
Final Thoughts
The YMPE is central to the CPP and QPP systems. It sets contribution limits and influences retirement benefits, ensuring fairness in the pension system.