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YMPE and tax limits jump by nearly five per cent for 2021

The Canada Revenue Agency (CRA) has released the year’s maximum pensionable earnings (YMPE) under the Canada Pension Plan (CPP) for 2021.1 The YMPE will be $61,600, which is up from $58,700 in 2020. The YMPE is calculated in accordance with a CPP legislated formula which accounts for the growth in average weekly wages and salaries in Canada every June 30th. Earnings above the YMPE for 2021 will not result in additional contributions to the CPP or QPP.

The CRA has also released its annual limits for various retirement plans, including money purchase (MP) and defined benefit (DB) pension plans. The 2021 MP contribution limit will be $29,210 and the 2021 DB limit will be $3,245.56. The 2021 Deferred Profit Sharing Plan (DPSP) contribution limit will be $14,605. The RRSP contribution limit lags the MP limit by one year, so the 2022 RRSP contribution limit will be $29,210.

Notably, the YMPE and the limits for pension plans and DPSPs have jumped by 4.9%, which is higher than usual.

In addition, employee and employer CPP contribution rates will increase to 5.45% in 2021 as a result of CPP enhancement, which is up from 5.25% in 2020. Contribution rates for the self-employed will also increase to 10.9% in 2021 from 10.5% in 2020. 2021 contribution rates for the QPP have not yet been announced; for 2020, the employee and employer QPP contribution rate is 5.7% and the rate for the self-employed is 11.4%.


The updated figures released by the CRA reflect the fact that the COVID-19 pandemic has apparently resulted in greater relative unemployment for lower-income Canadians. The higher than normal increase reflects the higher average earnings of those who remained employed. Although the YMPE is not permitted to decrease in future years, it can be expected that future increases will lag as the wage profile for the Canadian workforce returns to normal.

These updated figures will result in higher contributions to the CPP and QPP for employees with incomes high enough to reach these limits. In addition, all employees and employers will pay more because of the increase in the contribution rate.

Some employer pension plan contributions and benefit formulas will also be affected by the updated figures.

1  The Quebec Pension Plan (QPP) version of the YMPE, the maximum pensionable earnings (MPE), is usually set at the same amount as the YMPE.

News & Views - November 2020 (PDF)