Canada and Quebec Pension Plan

Overview

The Canada and Quebec Pension Plans (C/QPP) came into effect on January 1, 1966. The province of Quebec covers workers in Quebec and the Federal government covers workers in the rest of Canada. The plans are kept very similar.

The objective of the plan is to provide 25% of the worker's income to a maximum of 25% of the national average wage.

For years experts have warned that the plan is not sustainable, since the funding objective is only twice the estimated payments for the next year. Be sure to research the funding method of this pubic pension plan before you decide to rely on it.

Funding Method (Updated January 2008)

There is no government subsidy. The plan is funded with employee contributions and matching employer contributions. Those who are self employed pay both the employee and employer contribution when they file their annual income tax return.

The C/QPP employee contribution is 4.95% of pensionable earnings to a maximum of $2,049.30 ($44,900 Year's Maximum Pensionable Earnings less $3,500 Year's Basic Exemption multiplied by contribution rate)

Employers match employee contributions to the C/QPP. Self-employed individuals must pay both the employee and employer portion.

Taxation

The employer's premiums are a tax deductible expense to the employer and are not added to the employee's taxable income.

The employee's premiums are deductible from taxable income.

C/QPP benefit payments are taxable income.