How CPP is calculated: drop-outs, YMPE, start age and 2026 amounts

How CPP is calculated, in four steps

The Canada Pension Plan (CPP) retirement pension is calculated from how long you contributed, how much you earned each year up to the earnings ceiling, and the age you start. According to Service Canada, those three factors (age, contributions and average earnings) set your amount, and the 2026 maximum at 65 is $1,507.65 a month.

1. Count your contributory period. Service Canada looks at the years from age 18, when contributions start, to the month your pension begins.
2. Measure your earnings each year against the ceiling. Only employment or self-employment earnings up to the year's maximum pensionable earnings (YMPE), $74,600 in 2026, count. Earnings above the YMPE count only for the newer enhanced part, up to $85,000 in 2026.
3. Drop the weak years. The base part ignores up to 8 of your lowest-earning years, plus child-rearing and disability periods. The enhanced part uses your best 40 years.
4. Adjust for your start age. The pension falls by 0.6% for each month you start before 65 and rises by 0.7% for each month you start after 65.

Your own figure is on your Statement of Contributions in My Service Canada Account. Once you have it, compare your CPP at every start age from 60 to 70 with the CPP calculator.

Your contributory period starts at 18 and ends when your pension starts

The CPP contributory period is the stretch of your life that Service Canada averages your earnings over, and it generally runs from age 18 to the start of your pension. According to the Canada Pension Plan annual report, "workers start contributing to the Plan at age 18", and according to Service Canada, contributions stop at 70 even if you are still working.

Every year in that period counts, including years with no earnings at all, such as years at school, abroad or out of work. That is why the drop-out rules matter: without them, a gap year would pull your average down as if you had earned nothing for good.

According to Service Canada, the contributory period ends when you start your pension, turn 70 or die, whichever comes first. Someone who starts their pension at 65 has a contributory period of 47 years, from 18 to 65. Someone who starts at 60 has 42 years; someone who starts at 70 has 52 years. Service Canada also removes months when you received a CPP disability pension from the contributory period used for the base part, according to the annual report.

Only earnings you paid CPP on count. According to Service Canada, you do not contribute on other income, "such as investment earnings", so rental income, dividends, RRSP withdrawals and pension income do not raise your CPP.

The general drop-out removes up to 17% of your lowest years

The CPP general drop-out lets Service Canada ignore up to 17% of your contributory period with the lowest earnings, up to a maximum of 8 years, when it works out the base part of your pension. According to the Canada Pension Plan annual report for the year to 31 March 2024, this "helps to offset periods of low or no earnings due to unemployment, schooling, or other reasons".

For a pension starting at 65, 17% of 47 years is 7.99 years, which gives the full 8 years. So 39 years of earnings at or above the YMPE are enough for the full base pension. If you had 35 strong years and 12 weak ones, 8 of the weak ones are dropped and 4 stay in the average.

The enhanced part, built up since 2019, works differently. According to the same report, it is based on your best 40 years of earnings, which for someone starting at 65 leaves out the 7 years with the lowest earnings between 18 and 65. A separate over-65 drop-out in the base part lets higher earnings after 65 replace weaker years before 65, for people who keep working and contributing after 65 but have not yet started their pension, according to the annual report.

Child-rearing and disability periods are protected too

The child-rearing provision removes months when you had low or no earnings because you were the main carer of a child under 7, and it applies only if it raises your pension. According to Service Canada, it can apply if the child was born after 31 December 1958 and you or your spouse received Family Allowance or qualified for the Canada Child Benefit, even if you never received the benefit.

For the base part, those months are dropped out. For the enhanced part, Service Canada "drops in" pension credits for those years, based on your enhanced contributions in the 5 years before you became the main carer, if the credits are higher than what you actually earned.

You must ask for the child-rearing provision. Service Canada says you apply in sections 11A and B of the retirement pension form ISP1000, or on form ISP1640 if you already receive a CPP benefit. You need each child's name, date of birth and Social Insurance Number or proof of birth.

Disability periods are protected in a similar way. According to the CPP annual report, periods when you were disabled under the CPP legislation are left out of the contributory period for the base part. For the enhanced part, anyone who develops a disability in 2019 or later has credits dropped in for those months, based on their earnings in the 6 years before they became disabled. Service Canada says it considers these periods automatically when your application gives the required information.

YMPE 2026 and the CPP enhancement: CPP2 and the YAMPE

The year's maximum pensionable earnings (YMPE) for 2026 is $74,600, and the year's additional maximum pensionable earnings (YAMPE) is $85,000, according to the Canada Revenue Agency (CRA). The YMPE is the ceiling for the base and first additional CPP; the YAMPE is the ceiling for the second additional contribution, known as CPP2.

According to Service Canada, until 2019 the CPP replaced one quarter (25%) of your average work earnings up to the YMPE. The enhancement raises this to one third (33.33%) of covered earnings made after 2019, and extends cover to earnings between the YMPE and the YAMPE. The annual report puts the YAMPE at 114% of the YMPE from 2025.

The enhancement builds up slowly, because it depends on how many years you have contributed since 2019. Service Canada says it will raise the maximum retirement pension by more than 50% for people who make enhanced contributions for 40 years. Someone retiring in 2026 has at most 7 years of enhanced contributions, which is why today's maximum is well below the level it will reach once workers retire with 40 years of enhanced contributions.

The CRA had not published the 2027 YMPE when we checked on 28 September 2026; it is set each January from the change in the average wage.

Starting before or after 65: minus 0.6% or plus 0.7% a month

Starting CPP before 65 cuts your pension by 0.6% for every month early, and starting after 65 raises it by 0.7% for every month late. According to Service Canada, that is 7.2% a year, up to a 36% cut at 60, and 8.4% a year, up to a 42% increase at 70. There is no gain from waiting past 70.

The change is permanent. A pension started at 60 stays 36% lower for life, before yearly inflation increases. According to the CPP annual report, payments are indexed each January to the Consumer Price Index.

If you apply after 65, Service Canada can backdate your pension up to 11 months before the month it receives your application, but never earlier than the month after your 65th birthday. There is no backdating for a pension started before 65, so apply early enough if you want it at 60.

Worked example: earnings at 80% of the YMPE, starting at 60, 65 or 70

A worker whose earnings averaged 80% of the YMPE over a full career would get about $1,206.12 a month at 65 in 2026 terms, $771.92 at 60 or $1,712.69 at 70. These figures come from RightSums's CPP engine, run on 28 September 2026, in its rough mode with 39 or more years of earnings at 80% of the YMPE. Rough mode takes the 2026 maximum of $1,507.65 and scales it by your earnings share, so it ignores the enhancement's own rules.

The working behind the 65 figure: $1,507.65 x 80% = $1,206.12. At 60: $1,206.12 x (1 minus 0.36) = $771.92. At 70: $1,206.12 x 1.42 = $1,712.69.

The break-even ages show when waiting pays off. Starting at 65 instead of 60 overtakes the earlier start from about age 73 and 11 months. Starting at 70 instead of 65 overtakes from about age 81 and 11 months, and 70 overtakes 60 from about 78 and 3 months. These break-even ages do not depend on the size of the pension, so they apply to anyone.

A shorter career lowers the base. With 30 years at 80% of the YMPE, the same engine gives $927.78 a month at 65, $593.78 at 60 and $1,317.45 at 70. To reproduce any of these, choose rough mode in the CPP calculator and enter your years and earnings share.

The 2026 maximum and average CPP amounts

The maximum CPP retirement pension at 65 is $1,507.65 a month for pensions starting in January 2026, and the average for new pensioners at 65 was $877.01 a month in April 2026, according to Service Canada. The average is 58% of the maximum: the full amount needs about 39 years of earnings at or above the YMPE, which many careers do not reach.

Service Canada notes that maximum amounts "increase every month as a result of the enhancement", so a pension starting later in 2026 can be slightly higher than the January figure. If you work while receiving CPP before 70, your contributions buy a post-retirement benefit, paid from the following year for life.

CPP is only one part of public retirement income. Old Age Security (OAS) is based on years lived in Canada, not earnings; check your OAS and GIS with the OAS calculator. CPP counts in the net income used for the OAS recovery tax, which our guide to the OAS clawback explains.

How CPP deductions are calculated on your pay in 2026

CPP deductions on your pay are 5.95% of your earnings between $3,500 and $74,600 in 2026, plus 4% CPP2 on earnings between $74,600 and $85,000, according to the CRA. Your employer pays the same amount again. The most an employee pays in 2026 is $4,230.45 of CPP plus $416 of CPP2, or $4,646.45 in total.

The $3,500 basic exemption is spread across your pay periods. According to the CRA, it is $134.61 for each of 26 bi-weekly pays, $291.66 a month, or $67.30 a week. On a bi-weekly pay of $2,000, the deduction is ($2,000 minus $134.61) x 5.95% = $110.99.

The working for $50,000: ($50,000 minus $3,500) x 5.95% = $2,766.75. For $85,000: CPP is capped at ($74,600 minus $3,500) x 5.95% = $4,230.45, and CPP2 is ($85,000 minus $74,600) x 4% = $416. Self-employed people pay both halves: $8,460.90 of CPP and $832 of CPP2 at most.

Of the 5.95% rate, 4.95% is the base contribution and 1% is the first additional contribution, according to Service Canada. On your return, base contributions are claimed as a tax credit on line 30800 and enhanced contributions as a deduction on line 22215, according to the CRA. See your full take-home pay after CPP, EI and tax with the Canada income tax calculator, or compare provinces on the Canada income tax pages.

When CPP deductions stop, and when you get a refund

CPP deductions stop for the year once you reach the maximum with that employer, and they stop for good at 70. According to the CRA, employers deduct CPP from employees aged 18 to 69, even if the employee already receives a CPP or QPP retirement pension.

• At 65 to 69: if you already receive your CPP pension, you can stop contributing by giving your employer form CPT30, Election to Stop Contributing to the Canada Pension Plan. Without it, your contributions go towards the post-retirement benefit.
• At 70: contributions end, even if you keep working.
• Two jobs or a job change: each employer works out CPP on the pay it gives you, so your total for the year can go over the $4,230.45 and $416 maximums. According to the CRA, you claim the overpayment on line 44800 of your return, using Schedule 8, and you must ask for it within 4 years of the end of the year you overpaid.
• Under $3,500 for the year: any CPP deducted is refunded on your return, according to Service Canada.

Quebec works differently. If you work only in Quebec, you pay into the Quebec Pension Plan (QPP) instead, at a different rate collected by Revenu Québec, and Retraite Québec calculates the pension under its own rules.

What to do next to check your CPP

The first step is to get your real Statement of Contributions, because every calculation above depends on your own earnings record. Sign in to My Service Canada Account, open the Canada Pension Plan section and choose "View my benefit estimates", as Service Canada advises.

1. Check each year's earnings on the statement against your T4 slips. Missing years lower your pension, and you can ask Service Canada to correct them.
2. If you stayed home with a child under 7, make sure you claim the child-rearing provision on your application.
3. Enter the amount at 65 from your statement in the CPP calculator to see your pension, break-even ages and lifetime totals at each start age.
4. Add your OAS with the OAS and GIS calculator before choosing when to start either pension.