The CPP Contribution Rate Is Set to Fall in 2027, the First Cut Since 1966
On January 1, 2027, the base Canada Pension Plan contribution rate is set to fall from 4.95% to 4.75% for an employee, and from 9.9% to 9.5% once the employer’s matching half is counted. Contributions began in 1966. In the six decades since, the rate has gone up, stayed flat, and gone up again. It has never come down.
The same January 1 brings the usual increase in the earnings ceiling, which is indexed to wages. The two changes pull against each other and the rate cut wins: at every level of employment income above the $3,500 basic exemption, a CPP contributor pays less in 2027 than in 2026. That holds even for someone earning above the top of the second ceiling, who will be contributing on more earnings than anyone did in 2026.
Here is what the change is worth at each income, what Parliament has enacted, and what still has to happen before the new CPP contribution rate takes effect.
What comes off a paycheque
The 9.9% falling to 9.5% is the employee and employer rate for the base plan added together, which is how the government states it. Each side moves from 4.95% to 4.75%.
What actually leaves a paycheque is more than the base rate, because the CPP enhancement added a first additional contribution on top of it. That rate sits in Schedule 2 of the Act at 1.00% for “2024 and each subsequent year” and is not changing. So on earnings between the basic exemption and the first ceiling:
| Base | First additional | Total | |
|---|---|---|---|
| Employee, 2026 | 4.95% | 1.00% | 5.95% |
| Employee, 2027 | 4.75% | 1.00% | 5.75% |
| Self-employed, 2026 | 9.9% | 2.0% | 11.9% |
| Self-employed, 2027 | 9.5% | 2.0% | 11.5% |
CPP2, the second additional contribution on earnings between the two ceilings, is unchanged at 4.00% each for employee and employer, 8.00% for the self-employed.
The claim that this is a first is narrow and exact, and it is about that one employee rate. Section 11.1(1) sets a flat 1.8% from 1966 to 1986. Schedule 1 picks it up at 1.9% in 1987 and raises it every year to 4.7% by 2002, then holds it at 4.95% from 2003. Schedule 2 layers the first additional rate on from 2019, running 0.15, 0.30, 0.50 and 0.75 before reaching 1.00 in 2023, so the combined employee rate climbed through 5.10%, 5.25%, 5.45% and 5.70% and then held at 5.95% from 2023 through 2026. Neither falls. Then 2027 comes in at 5.75%.
What it costs at each income
The basic exemption is the fixed point in all of this. Section 20(2) sets it at $3,500 for each year after 1997, and it does not move with anything.
The ceilings do move. The Canada Revenue Agency has not published its 2027 figures: its contribution rates page and its CPP2 page were both last updated October 31, 2025, and neither carries a 2027 row. The first ceiling follows a formula whose inputs are all public, and running it narrows 2027 to two candidates, $76,700 or $76,800, worked out below. The second follows from the first. Section 18.1 of the Canada Pension Plan sets the Year’s Additional Maximum Pensionable Earnings as a multiple of the YMPE, rounded down to $100. The multiplier was 1.07 in the first year, under s. 18.1(1)(a), and has been 1.14 for 2025 and after, under s. 18.1(1)(b). That reproduces all three published years: 1.07 times 68,500 gives the $73,200 of 2024, and 1.14 times 71,300 and 74,600 give $81,200 and $85,000.
Here is 2026 as the CRA’s CPP contribution rates, maximums and exemptions page publishes it:
| Employee and employer | Self-employed | |
|---|---|---|
| Maximum on base and first additional | $4,230.45 | $8,460.90 |
| Maximum CPP2 | $416.00 | $832.00 |
| All in | $4,646.45 | $9,292.90 |
And 2027, worked out under each candidate ceiling:
| YMPE $76,700 | YMPE $76,800 | |
|---|---|---|
| Second ceiling (YAMPE) | $87,400 | $87,500 |
| Band between the ceilings | $10,700 | $10,700 |
| Maximum employee, base and first additional | $4,209.00 | $4,214.75 |
| Maximum employee CPP2 | $428.00 | $428.00 |
| Maximum employee, all in | $4,637.00 | $4,642.75 |
| Maximum self-employed, all in | $9,274.00 | $9,285.50 |
One line there is not a range at all. Flooring 1.14 times the ceiling to the next $100 and subtracting the ceiling leaves a band of $10,700 for every YMPE from $76,500 to $77,100, which covers both candidates and some distance either side of them. It would take a ceiling of $76,400 or lower to make the band $10,600, or $77,200 or higher to make it $10,800. So the maximum CPP2 contribution in 2027 is $428.00 for an employee, $428.00 for the employer and $856.00 for a self-employed person, up from $416.00 and $832.00. That figure is determined.
The headline result is the maximum, and it falls under both candidates: from $4,646.45 to $4,637.00 or $4,642.75 for an employee, and from $9,292.90 to $9,274.00 or $9,285.50 for someone self-employed. The margin at the very top is thin, between $3.70 and $9.45. The rate cut beats the ceiling increase at every income, but at the top it only just does.
Lower down the scale the gap is wider. The table below is the employee contribution including CPP2, with 2027 computed on the $76,700 candidate.
| Employment income | 2026 | 2027 | Difference |
|---|---|---|---|
| $20,000 | $981.75 | $948.75 | -$33.00 |
| $40,000 | $2,171.75 | $2,098.75 | -$73.00 |
| $60,000 | $3,361.75 | $3,248.75 | -$113.00 |
| $70,000 | $3,956.75 | $3,823.75 | -$133.00 |
| $74,600 | $4,230.45 | $4,088.25 | -$142.20 |
| $85,000 | $4,646.45 | $4,541.00 | -$105.45 |
| $100,000 | $4,646.45 | $4,637.00 | -$9.45 |
The $70,000 row is the one to check the work against. Our arithmetic puts the saving at exactly $133.00, the figure the Department of Finance published in April.
That comparison was run at every dollar of employment income from $3,500 to $120,000, on both candidate ceilings. The 2027 contribution is lower everywhere above the exemption, and the two are equal only at $3,500 itself, where both are zero. The employer matches the employee on every line, so an employer’s maximum cost per employee falls by the same amount.
Someone self-employed sees the largest single change, because they pay both halves. The all-in maximum of $9,274.00 or $9,285.50 does not come out through payroll. It is settled on a personal return, and an obligation that size is one of the things that pushes a filer into paying by instalments through the year rather than in one lump at filing. Our explainer on how CRA tax instalments work sets out when that obligation is triggered.
Contributions do not automatically stop at 65
Under s. 12(1)(c), employment income after 65 stays in contributory earnings unless a retirement pension is already payable and the worker elects to exclude it, an election governed by s. 12(1.1): made in prescribed form, effective the first day of the following month, available once in a year, and not revocable in the year it is made. So between 65 and 70 contributing is the default and can be switched off. At 70 it ends either way, because s. 12(1)(d) takes income received after that age out of contributory earnings entirely. Contributions made in the meantime buy a specific additional benefit, which our piece on the CPP post-retirement benefit explains.
Parliament has passed the cut
Division 5 of the Spring Economic Update 2026 Implementation Act, S.C. 2026, c. 22, which began as Bill C-30 and was assented to on June 18, 2026, runs to four sections. Section 42 closes the existing Schedule 1 row by changing “2003 and each subsequent year” to “2003 to 2026”. Section 43 adds a row reading “2027 and each subsequent year | 4.75 | 4.75 | 9.5”. Section 41 rewrites the rate-setting formulas in s. 113.1. Section 44 brings the Division into force, and it names no date.
It says instead that “this Division comes into force, in accordance with subsection 114(4) of the Canada Pension Plan, on a day to be fixed by order of the Governor in Council”. Section 114(4) is the provincial consent rule, and it is strict. An order of that kind “may not be made and shall not in any case have any force or effect unless the lieutenant governor in council of each of at least two thirds of the included provinces, having in the aggregate not less than two thirds of the population of all of the included provinces, has signified the consent of that province to the enactment”. Canada’s finance ministers unanimously agreed to the cut as part of the 2025-2027 Triennial Review, which is the political step that precedes formal consent rather than the consent itself: s. 114(4) is satisfied only once the lieutenant governor in council of each consenting province has signified it.
An included province, under s. 114(1), is a province other than Yukon, the Northwest Territories or Nunavut, “except a province providing a comprehensive pension plan unless … there is in force an agreement entered into under subsection 4(3) with the government of that province”. Section 4(1) carries that exclusion into the contribution rules themselves, which “do not apply in relation to employment in a province providing a comprehensive pension plan”, or to a self-employed person resident in one. The Act leaves the term to regulation and names no province. The CRA names it: its page on the deduction of Canada Pension Plan contributions tells an employer that where an employee’s province of employment is Quebec, it has to deduct “Quebec Pension Plan (QPP) contributions instead of CPP contributions”, whatever province the employee lives in.
The most consequential line is the one easiest to skip. Section 44(1) switches off CPP s. 114(2), which otherwise deems an enactment altering a contribution rate to come into force no earlier than the first day of the third year following the year in which notice of intention was laid before Parliament. Without that subsection, the earliest date available for this cut would be set by that clock rather than by the government’s own timetable.
January 1, 2027 is the government’s date rather than the statute’s. The Department of Finance release on Spring Economic Update 2026 key measures described the measure as “reducing the contribution rate of the base Canada Pension Plan from 9.9 per cent to 9.5 per cent, effective January 1, 2027, translating into annual savings of about $133 for an employee earning $70,000 a year, with equivalent savings for their employer”, and the department repeated the 2027 start when the bill passed. The Justice Laws amendments not in force page for the Canada Pension Plan, generated from a consolidation current to September 30, 2026, lists ss. 41, 42 and 43 among the Act’s amendments not in force.
Why the rate is coming down
The cut came out of the 2025-2027 Triennial Review. Chapter 2 of the Spring Economic Update 2026 records that “Canada’s Ministers of Finance unanimously agreed earlier this month to reduce the contribution rate for the CPP as part of the 2025-2027 Triennial Review”, and gives the actuarial ground: “The 32nd Actuarial Report on the CPP, tabled in Parliament on December 8, 2025, showed that the minimum contribution rate in the base CPP … is at least 69 basis points below the legislated rate.” The base plan, in other words, has been collecting more than it needs to fund itself. The cut takes 40 basis points off that legislated rate, so at least 29 basis points of the gap are left unused. The chapter sets the change against affordability, “as the cost of essential goods, housing, and everyday expenses remains high”, and says it preserves “the long-term sustainability of the plan”.
Division 5 is about rates and nothing else. Sections 41, 42 and 43 amend s. 113.1 and Schedule 1, and s. 44 is the coming into force provision. Nothing in the Division amends Part II of the Canada Pension Plan, which is where benefits are calculated.
Nor is 4.75% a permanent figure. CPP s. 11.1(2) makes the contribution rate whatever Schedule 1 says, “as amended from time to time under section 113.1”, and s. 41 rebuilds that triennial machinery around 4.75% as its reference point, including a rate set by the formula “4.75% + 1 ÷ 2(A – 4.75%) + C” where the minimum rate runs above it. So 4.75% becomes the number the next triennial review works from, not one fixed for good.
The 2027 ceiling is $76,700 or $76,800
The formula is in section 18 of the Canada Pension Plan, which sets the Year’s Maximum Pensionable Earnings as the previous year’s amount, calculated without reference to subsections (2) and (3), multiplied by the ratio of two twelve-month averages of the Wage Measure, the first ending June 30 of the preceding year and the second a year before that. Subsection 18(2) rounds the result down to the next multiple of $100 and 18(3) stops it ever falling. Under 18(5) the Wage Measure is the average weekly wages and salaries of the Industrial Aggregate in Canada, published by Statistics Canada.
Two things follow. The rounding is downward and the unrounded amount is what carries into the next year’s calculation, so the figure the CRA prints is a display value sitting on a continuous series. And the index is wages, not prices. The federal tax brackets and the TFSA limit are indexed instead to the Consumer Price Index, under Income Tax Act s. 117.1, over the twelve months ended September 30, and the TFSA limit is then “rounded to the nearest multiple of $500” under s. 207.01(1) rather than down to the next $100. A different index and a different rounding step, which is why next year’s TFSA limit moves by a different amount.
The wage inputs come from Statistics Canada table 14-10-0203, average weekly earnings by industry, on the series for all employees including overtime, unadjusted for seasonality. Of seven series tested against the published ceilings, it is the only distinct measure that tracks them: exact in 7 of the 23 years from 2004, within $100 in 17, and never off by more than $100 since 2010. Its seasonally adjusted twin scores identically, because averaging twelve months removes the seasonality that separates them. Measures limited to salaried or hourly workers, or excluding overtime, all fail, the nearest of them by as much as $300 since 2010.
The twelve months ending June 30, 2026 averaged 1322.7600 against 1286.3825 a year earlier, a ratio of 1.02827891, or wage growth of 2.83%. Applied to the published 2026 ceiling of $74,600, and allowing for the unrounded 2026 amount sitting between $74,600 and $74,700, the unrounded 2027 amount lands between $76,709.61 and $76,812.43. Rounded down, that is $76,700 or $76,800, a rise of about $2,100 to $2,200.
That band has a record behind it. Run back through the years the wage series reaches, the published figure fell inside the band in 16 of the 17 years from 2010 to 2026. The band is usually two $100 steps wide, as it is for 2027, and was three in 2021. The single miss is 2024, where the CRA published $68,500 against a band of $68,600 to $68,700. Before 2010 it misses every year back to 2004, by as much as $500.
The reason for both is in s. 18(6), which directs the calculation to use the most recently published revision of the Industrial Aggregate available before the calculation is made. Statistics Canada revises that series afterwards, so a reconstruction run today is not running on the data the official calculation ran on, and the further back the year, the more the vintage has drifted. The 2024 miss shows it cleanly. The method came out $100 above the published figure, which on a single consistent vintage cannot happen: the published prior-year ceiling is a lower bound on the unrounded amount, so the method can only land low or exact. Landing high means the underlying data moved.
What is settled and what is not
The rate has cleared Parliament and waits on an order in council made with provincial consent, and January 1, 2027 is the government’s date for it. The $3,500 exemption is fixed by s. 20(2). The band between the two ceilings is $10,700 for any ceiling from $76,500 to $77,100, which fixes the CPP2 maximum at $428.00 for an employee. And the all-in maximum contribution is lower than 2026 under both candidates, for employees, for employers and for the self-employed. What the CRA’s announcement will settle is the ceiling, and this method has been wrong before: of the seven years it has missed, six missed low, with the published figure below the band. If 2027 is a miss, $76,600 is the likelier direction than $76,900.
Data as of October 29, 2026.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. The 2027 contribution rates in this article come from Schedule 1 to the Canada Pension Plan as amended by section 43 of the Spring Economic Update 2026 Implementation Act, S.C. 2026, c. 22, and from Schedule 2 of the Act. Those amendments were listed among the Act’s amendments not in force on the Justice Laws consolidation current to September 30, 2026, and come into force by order of the Governor in Council. The 2027 earnings ceilings are computed under Canada Pension Plan section 18 from Statistics Canada table 14-10-0203, average weekly earnings by industry, unadjusted for seasonality, for the twelve months ended June 30, 2026, and are given as a two-value range rather than a single figure. The 2026 figures are as published by the Canada Revenue Agency, whose contribution rate and CPP2 pages were last updated October 31, 2025 and carried no 2027 row as of October 29, 2026.
