How your employer determines your CPP contribution in 2026
First, write down your annual salary income and subtract $3,500. That is the basic exemption given by the Canada Revenue Agency (CRA). The net amount is called premium income because your CPP contribution will be a percentage of this amount.
- CPP1: If your maximum pension basis is $74,600 or less, your CPP1 contribution is 5.95% of premium income, which is $71,100.
- CPP2: But if your income is between $74,600 and $85,000, your CPP2 contribution is 4% of surplus income up to $10,400 ($85,000 – $74,600).
Your total CPP contribution will be capped at $4,646.45, even if your income exceeds $85,000.
Scenario #1: Jacob has a maximum pensionable income of $83,000, which means both CPP1 and CPP 2 are deducted.
His CPP1 is 5.95% on $71,100 = $4,230.45
His CPP2 is 4% at $8,400 ($83,000 – $74,600) = $336
Scenario #2: Maya has a maximum pensionable income of $90,000, which means both CPP1 and CPP 2 are deducted.
Her CPP1 is 5.95% on $71,100 = $4,230.45
Her CPP2 is 4% on $10,400 ($85,000 – $74,600) = $416
Scenario #3: Anna has a maximum pensionable income of $70,000, which means only CPP 1 is deducted.
Her CPP1 is 5.95% at $66,500 ($70,000 – $3,500) = $3,956.75
| Details | Scenario #1 | Scenario #2 | Scenario #3 |
| Maximum pensionable income | $74,600.00 | $74,600.00 | $74,600.00 |
| Your income | $83,000.00 | $90,000.00 | $70,000.00 |
| Basic exemption | -$3,500.00 | -$3,500.00 | -$3,500.00 |
| Contributory income | $71,100.00 | $71,100.00 | $66,500.00 |
| CPP 1 contribution rate | 5.95% | 5.95% | 5.95% |
| CPP 1 | $4,230.45 | $4,230.45 | $3,956.75 |
| Maximum pensionable wage CPP2 | $85,000.00 | $85,000.00 | $85,000.00 |
| Pensionable income for CPP2 | $8,400.00 | $10,400.00 | $0.00 |
| CPP 2 contribution rate | 4% | 4% | 4% |
| CPP 2 | $336.00 | $416.00 | $0.00 |
| Total CPP contribution | $4,566.45 | $4,646.45 | $3,956.75 |
Building an alternative CPP
The CPP enhancement increases your CPP payout by up to 50% if you maximize CPP1 and 2 contributions for 40 years. Even then, it will be able to meet a third of your income needs.
You have no control over how much you can contribute to and withdraw from CPP. What you can decide is when you will receive a payout, after age 60 and before age 70.
- Even there, if you choose to take the payout before age 65, it will be reduced by 0.6% per month to 36% for 60 months.
- If you postpone the payment beyond the age of 65, it will increase by 0.7% per month for 60 months to 42%.
While contributing to CPP, you can also invest $4,700 annually to build your retirement portfolio and increase the investment by 5% annually. If you have an investment horizon of 15 to 20 years, consider investing in growth stocks to build wealth. Continue to withdraw profits from growth stocks at regular intervals and invest in safer dividend stocks.
Shares to invest in for the long term
You could consider investing €4,700 Topicus.com (TSXV:TOI), which is trading near a 52-week low due to a management change at its parent company Constellation software. The company could see a cyclical downturn in 2026 as tech stocks correct after the artificial intelligence (AI) rally.
However, the company’s composite model remains unaffected. Topicus.com has completed a major acquisition and its impact on cash flows will be visible in the first quarter of 2026. Debt levels have increased and depreciation on acquired assets has reduced short-term profits. However, the recurring cash flow from these acquisitions will help the country reduce debt and acquire more companies, increasing cash flow and profits in the long term.
Topicus.com is a stock to buy on the dip and sell when the stock is up 40-50% as that is the cyclical range. If you invest $2,000 in Topicus.com and it turns into $3,000, you can make a profit of $1,000 and invest in dividend stocks like Enbridge or CT REIT And earn inflation-adjusted dividend income.
#CPP #contribution #employer #deduct