2026 will set the tone for new deductions, tax brackets, and contribution room. The maximum Canada Pension Plan (CPP) contribution for 2026 is $4,646.45 if your maximum pensionable earnings are $85,000 and above. The contribution amount is 4.9% higher than $4,430.1 in 2025.
How your employer will determine your CPP contribution in 2026
First, write down your annual salary income and deduct $3,500. That is the basic exemption the Canada Revenue Agency (CRA) gives. The net amount is called contributory earnings because your CPP contribution will be a percentage of this amount.
- CPP1: If your maximum pensionable earnings are $74,600 or lower, your CPP1 contribution will be 5.95% of the Contributory earnings, which is $71,100.
- CPP2: But if your income is between $74,600 and $85,000, your CPP2 contribution will be 4% of the 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 is above $85,000.
Scenario #1: Jacob has maximum pensionable earnings of $83,000, which means both CPP1 and 2 will be deducted.
His CPP1 will be 5.95% on $71,100 = $4,230.45
His CPP2 will be 4% on $8,400 ($83,000 – $74,600) = $336
Scenario #2: Maya has maximum pensionable earnings of $90,000, which means both CPP1 and 2 will be deducted.
Her CPP1 will be 5.95% on $71,100 = $4,230.45
Her CPP2 will be 4% on $10,400 ($85,000 – $74,600) = $416
Scenario #3: Anna has maximum pensionable earnings of $70,000, which means only CPP1 will be deducted.
Her CPP1 will be 5.95% on $66,500 ($70,000 – $3,500) = $3,956.75
| Particulars | Scenario #1 | Scenario #2 | Scenario #3 |
| Maximum pensionable earning | $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 Earnings | $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 earning CPP2 | $85,000.00 | $85,000.00 | $85,000.00 |
| Pensionable earnings 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 will increase your CPP payout by up to 50% if you max out CPP1 and 2 contributions for 40 years. Even then, it will be able to meet one-third of your income needs.
You don’t have control over how much you can contribute and withdraw from CPP. What you can control is when to take 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 up to 36% for 60 months.
- If you delay the payout above age 65, it will increase by 0.7% per month up to 42% for 60 months.
While contributing to CPP, you can also invest $4,700 annually to create your pension portfolio and increase the investment by 5% annually. If you have a 15- to 20-year investment horizon, consider investing in growth stocks to build wealth. Keep withdrawing profits from growth stocks at regular intervals and invest in safer dividend stocks.
Stocks to invest in for the long term
You could consider investing $4,700 in Topicus.com (TSXV:TOI), which is trading near its 52-week low because of a management change at parent Constellation Software. The company could see a cyclical downturn in 2026 as tech stocks correct from the artificial intelligence (AI) rally.
However, the company’s compounding model remains unaffected. Topicus.com has completed a major acquisition, and its impact on the cash flows will be visible in the first quarter of 2026. The debt level has increased, and the amortization of acquired assets has reduced earnings in the short term. However, the recurring cash flow from these acquisitions will help it reduce debt and acquire more companies, compounding cash flow and earnings in the long term.
Topicus.com is a stock to buy the dip and sell when the stock surges 40-50%, as that is its cyclical range. If you invest $2,000 in Topicus.com and it becomes $3,000, you can book a profit of $1,000 and invest in dividend stocks like Enbridge or CT REIT and earn inflation-adjusted dividend income.
