Understanding how the Canada Pension Plan (CPP) works is essential for every Ontario worker in 2026. With CPP2 now fully in effect, your actual contributions and retirement entitlement are higher than in previous years.
What is CPP?
The Canada Pension Plan is a mandatory earnings-based retirement program for employed and self-employed Canadians aged 18–70. Contributions during your working years build a monthly pension you can collect as early as age 60 or as late as age 70.
2026 CPP Contribution Rates
| Tier | Earnings Range | Employee Rate | Max Contribution |
|---|---|---|---|
| CPP (base) | ,500 – ,600 | 5.95% | ,229.85 |
| CPP2 | ,600 – ,000 | 4.00% | .00 |
Employers match the base CPP (5.95%) but do not match CPP2. Self-employed individuals pay both employee and employer portions: 11.90% on base earnings plus 8.00% on CPP2 earnings.
CPP Retirement Benefit at 65
The maximum CPP retirement benefit at age 65 for 2026 is $1,507/month. However, the average Canadian receives approximately /month because few contribute at the maximum for 39 full years.
Should You Take CPP Early or Late?
| Age | Adjustment | Monthly (from ,000 base) |
|---|---|---|
| 60 | −36% | |
| 65 | 0% | ,000 |
| 70 | +42% | ,420 |
The break-even point between taking CPP at 60 vs 65 is approximately age 74. If you expect to live past 74, deferring to 65 (or beyond) typically maximizes lifetime benefits.
What happens to CPP if I work past 65?
If you continue working after 65 while collecting CPP, you can make voluntary CPP contributions under the Post-Retirement Benefit (PRB) program. Each year of additional contributions increases your monthly CPP payment for life.
Is CPP taxable income?
Yes. CPP payments are fully taxable as regular income. However, you can split CPP income with your spouse/common-law partner, which can significantly reduce your combined tax bill in retirement.