This bill was last introduced in the 42nd Parliament, 1st Session, which ended in September 2019.
Bill Morneau Liberal
This bill has received Royal Assent and is now law.
This is from the published bill.
Part 1 of this enactment amends the Canada Pension Plan to, among other things,
(a) increase the amount of the retirement pension, as well as the survivor’s and disability pensions and the post-retirement benefit, subject to the amount of additional contributions made and the number of years over which those contributions are made;
(b) increase the maximum level of pensionable earnings by 14% as of 2025;
(c) provide for the making of additional contributions, beginning in 2019;
(d) provide for the creation of the Additional Canada Pension Plan Account and the accounting of funds in relation to it; and
(e) include the additional contributions and increased benefits in the financial review provisions of the Act and authorize the Governor in Council to make regulations in relation to those provisions.
This Part also amends the Canada Pension Plan Investment Board Act to provide for the transfer of funds between the Investment Board and the Additional Canada Pension Plan Account and to provide for the preparation of financial statements in relation to amounts managed by the Investment Board in relation to the additional contributions and increased benefits.
Part 2 makes related amendments to the Income Tax Act to increase the Working Income Tax Benefit and to provide a deduction for additional employee contributions.
All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.
Bill Morneau LiberalMinister of Finance
moved that Bill C-26, An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act, be read the third time and passed.
François-Philippe Champagne LiberalParliamentary Secretary to the Minister of Finance
Mr. Speaker, I am very pleased to talk today about enhancing the Canada pension plan. I hope colleagues will stay to listen to this very important speech today. They might learn something they do not know.
The Government of Canada understands that a strong economy starts with a strong middle class. With the pace of change accelerating in Canada, we need to make smart decisions and sound investments today to ensure that Canadians have access to the good, well-paying jobs of tomorrow.
As my colleague Minister Morneau recently alluded to in the fall economic statement—
The Speaker Geoff Regan
Order. The hon. member knows, I think, that we do not refer to members here by their names but by their titles. I think he meant to refer to the Minister of Finance.
The hon. Parliamentary Secretary to the Minister of Finance.
François-Philippe Champagne Liberal Saint-Maurice—Champlain, QC
Mr. Speaker, I apologize. It is because of the emotion about the good work my colleague, the Minister of Finance, is doing.
As the minister recently highlighted in the fall economic statement, this government is putting the middle class first. For example, we are investing an additional $81 billion in public transit, green and social infrastructure, and transportation infrastructure that supports trade and rural and northern communities to bring Canadians good jobs, a cleaner environment, and thriving communities for years to come.
We are doing this because we believe that Canadians have what it takes to succeed, and our government is willing and able to act to create a better future for our children and grandchildren. That is exactly what we are doing by enhancing the Canada pension plan.
We know that middle-class Canadians are working harder than ever, and many of them are worried that they will not be able to save enough money for their retirement. Here is the big question: how widespread is this problem and how can we help Canadians to do better?
The Department of Finance has examined whether families nearing retirement are adequately prepared for retirement. About one in four families approaching retirement, which is 1.1 million families in our country, are at risk of not saving enough to maintain their standard of living in retirement. The risk is highest for middle-income families. Families without workplace pension plans are at an even greater risk of under-saving for retirement. A third of these families are at risk.
Economic conditions since the global recession of 2008 pose particular difficulty for younger Canadians. They are facing the challenge of securing adequate retirement savings at a time when fewer can expect to work in jobs that will include a workplace pension plan.
An extended period of low interest rates could mean that young workers will have to deal with a lower return on their retirement savings. That means that they may need to save even more money than previous generations to have the same standard of living when they retire. In addition, because younger generations are more likely to be in debt than previous generations, they are more exposed to a wide range of risks, from financial market volatility to fluctuations in housing prices. Given these factors, younger generations will have to rely more heavily on their personal retirement savings. Furthermore, increased life expectancy increases the risk that members of younger generations will exhaust what money they managed to save for retirement before the end of their lives.
Given these circumstances, we have a simple yet critical responsibility. We need to act now if we want Canadians to have a secure and dignified retirement.
This is why we are proposing to enhance the Canada pension plan, or as we commonly refer to it, the CPP.
On June 20, Canada's finance ministers reached a historic agreement to make meaningful changes to the CPP that would put more money in the pockets of Canadians after they retire. The CPP enhancement would increase the retirement benefits people will receive. Enhanced benefits would accumulate gradually over time as individuals paid into the enhanced CPP.
Young Canadians just entering the workforce would see the largest increase in benefits. The real question, therefore, is what that means for today's young people and for future generations.
As my fellow members know, the CPP is currently designed to replace one-quarter of income, up to the average industrial wage in retirement. The changes we are proposing would increase that percentage to one-third. This means that a person making $50,000 a year over a 40-year career would receive about $16,000 per year in retirement instead of $12,000. That is $4,000 more each year right into the people's pockets. Even a more modest earner, one averaging $35,000 a year, would receive almost $3,000 a year above the $8,500 provided by the current CPP. In addition, the enhancement would increase the maximum level of earnings that are replaced by the CPP by about 14%. This would further increase the CPP benefits for those who earn above the average wage at any point in their working years.
To fund these enhanced benefits, annual CPP contributions would increase modestly over seven years, starting in 2019. Right now, for example, people earning about $50,000 a year contribute around $2,300 to the CPP per year, or $190 a month. With the enhancement, those people would contribute an additional $70 per year, or $6 a month, starting in 2019. By the end of the seven-year phase-in period in 2025, their contributions would amount to an additional $475 per year, or $40 per month. As members can see, those are modest increases for very significant enhanced benefits.
Helping people achieve a secure retirement with adequate income is among the key elements of long-term economic and social sustainability.
That is what Canada has been doing for a long time. Our retirement income system is widely recognized as being among the best in the world. It offers a combination of public pension plans and voluntary private savings mechanisms enabling people to save for retirement.
The Canada pension plan is one of the cornerstones of the system, and the 28th actuarial report on the Canada pension plan, prepared by the chief actuary, confirms that the CPP will be viable in the long term.
Our system also includes the old age security program, which offers significant income support to Canadian seniors. We recently restored the age of eligibility for old age security to 65 to improve the lives of seniors, particularly vulnerable, low-income individuals, many of whom are single retired women. According to our calculations, if we had not rolled back the policy, 100,000 Canadians aged 65 or 66 would have slipped into poverty, thereby increasing the poverty rate among seniors from 6% to 17%.
In addition to restoring the age of eligibility for old age security, we increased the guaranteed income supplement, which provides additional support to vulnerable, low-income seniors. This measure will significantly improve the financial security of about 900,000 seniors and will lift 13,000 of them out of poverty.
In addition to these income sources, Canadians can save through voluntary tax-assisted private savings plans, whether it is registered pension plans, pooled registered pension plans, registered retirement savings plans, or tax-free savings accounts.
While so far we have been discussing retirement benefits, it is important to note that the CPP also provides supplementary benefits, including the disability pension and the survivor's pension, which would also increase as a result of this enhancement.
The disability pension is a monthly benefit provided to people who have made sufficient CPP contributions and whose disability prevents them from working at any job on a regular basis. By increasing the amount of this benefit, the enhancement would provide greater security for working-age Canadians.
The survivor's pension is a monthly benefit provided to the surviving spouse of a deceased CPP contributor. By increasing the amount of the survivor's pension, the enhancement would provide more financial security to widows and widowers and further strengthen our retirement income system.
It is also important to note that CPP benefits are funded by the contributions of workers and employers and investments, rather than through tax revenues.
Employees contribute 4.95% of their earnings, up to $54,900. This dollar figure approximates the average industrial wage, and increases a little each year to reflect changes in wages.
Employers also contribute at the rate of 4.95%. Self-employed workers pay both halves of the contribution, or 9.9% of pensionable earnings.
However, to put the issue of affordability into perspective, our contribution rates in Canada are much lower than those in other countries with contributory public pension plans.
In fact, the CPP contribution rate is about half the average rate among 25 countries of the OECD, otherwise known as the Organisation for Economic Co-operation and Development, which have such plans.
This applies to employers here in Canada. The Canadian employer portion is less than half the average OECD employer rate, which was 11.2%, in 2012.
Employees in Canada also pay lower CPP contribution rates. The average employee rate is 8.4% in comparable OECD countries. Even on the world stage, our contributions are very much lower than what other people are paying in comparable countries with such plans.
I understand some people might be worried an enhanced CPP would change that. However, let me reassure Canadians who are watching at home, our contribution rates will still be much lower than the average.
In fact, even with the enhancement, CPP contribution rates would rank the fourth lowest among 25 OECD countries with contributory pension plans based on their 2012 contribution rates.
An enhanced CPP would still be one of the most affordable plans in the world. More importantly, it would further help Canadians achieve a safe and secure retirement.
I know some are concerned about the increased contributions, and what it would mean to their bottom line, to their paycheque. I am sure people at home watching us are concerned about that, so let me answer that.
We thought about this and designed a phased-in approach so that the modest increase in contributions would occur gradually over a seven-year implementation period.
We also thought about employers in designing the enhanced CPP. The slow phase-in of the CPP contribution increases was designed with the express purpose of minimizing their impact, and giving employers across our nation, as well as employees, time to adjust to these changes.
Let me talk about the working income tax benefit.
As I mentioned, the improvements we are proposing include a modest increase in contributions. We know that despite the long-term benefits of enhancing the Canada pension plan, some low-income workers might have a hard time making room in their budget for higher CPP contributions.
Our government is focused on developing policies and implementing programs based on fairness and on helping those less fortunate in our society. Enhancing the Canada pension plan aligns with that perspective and our government's approach.
To ensure that eligible low-income workers are not financially burdened as a result of the extra contributions, the Government of Canada will enhance the working income tax benefit, or WITB. The WITB is a refundable tax credit that supplements the earnings of low-income workers.
The proposed enhancement to the WITB is designed to provide additional benefits to eligible low-income workers in order to more or less offset their incremental CPP contributions.
Clearly, we are standing up for Canadians who need a little extra support.
Let me turn to the economic benefits.
Our analysis shows there are economic benefits flowing from this enhancement. Over the long-term, employment levels will be permanently higher, between 0.03% and 0.06%, in our country.
This is good news for everyone.
Most people do not know that the CPP fund is ranked as one of the 10 largest retirement funds in the world. Because of this and its long investment horizon, the Canada Pension Plan Investment Board is able to undertake investments, and form partnerships that are beyond the scope of other investment managers.
It has achieved an enviable record of strong returns on behalf of the contributors and beneficiaries of the CPP. Over the long-term, greater CPP benefits will boost demand and increase overall savings in our country. This will in turn boost our economic output, and make more money available for investment.
We are estimating that Canada's gross domestic product will increase between 0.05% to 0.09% over the long-term as a result of the CPP enhancement. The enhancement will not only provide retirement security for more Canadians, it will create jobs and have a positive, long-term impact on the Canadian economy.
Let me turn to sustainability.
We are helping Canadians save more for a secure retirement by relying more on the Canada pension plan, which is a solid and viable financial vehicle. We are ensuring that the CPP increases will be entirely dedicated to increasing the benefits Canadians will receive.
As hon. members will recall, last month, the current chief actuary of Canada said in his latest report that at the current contribution rate the Canada pension plan is on a sustainable financial footing for at least the next 75 years. Canadians can rest assured that the financial foundation of the Canada pension plan expansion will be as solid as a rock.
As we know, the Canada Pension Plan Investment Board, or CPPIB, always invests in public and private assets for the long term, for people who will be retiring over the coming decades.
On June 30, 2016, the Canada pension plan fund stood at more than $287 billion, which is quite something. Obviously, this is a very solid foundation for the future.
In closing, the expanded Canada pension plan is a good tool used at the right time to improve the retirement income security of today's workers, especially our young workers. Improving the retirement income security of Canadians through the Canada pension plan presents various other benefits in addition to the economic ones I pointed out. The CPP provides secure and predictable benefits for life, which means that Canadians can worry less about exhausting their savings or having their savings affected by the vagaries of the market. Canada pension plan benefits are fully indexed to inflation, which reduces the risk of price hikes gradually eroding the purchasing power of retirement savings. The expansion also includes increased benefits for the families of Canadian workers in the event of death or disability.
The CPP is a good fit for Canada's changing job market.
I would like members to remember this is good for Canada. This is good for younger generations. This is good for all people who are going to retire 40 years from now and in the years to come.
All members in this House will talk to their children and grandchildren, and be proud of this day.
Scott Duvall NDP Hamilton Mountain, ON
Madam Speaker, my colleague has stated how good the plan is, and we agree with him that these increases have to go forward to help our future.
However, he has failed to say there is some critical language missing, particularly the dropout times for people who are child-rearing, and for people with disabilities as it is in the existing CPP.
We have heard many times in this House, when we have raised that, that they will fix it and they have not. We have been assured that the Minister of Finance will bring this up at the next ministers' meeting, the triennial meeting, in December.
That is not a commitment. Raising the issue is saying we will talk about it. We need a commitment from the Minister of Finance that when he goes there, he is going to propose that an oversight and a mistake was made, and that language will be included in the enhancement.
I would like to hear the member's comments. Will we have a commitment from the Minister of Finance that he will be proposing this type of language be put in?
François-Philippe Champagne Liberal Saint-Maurice—Champlain, QC
Madam Speaker, let us look back. In June, we achieved a historic agreement with provincial leaders, the finance ministers of the provinces, on an enhancement to the CPP. We are cognizant of the issue that he mentioned, the dropout provision, but this enhancement will benefit all Canadians. The Minister of Finance has taken his comments into consideration, as members well know.
We have an agreement with the provinces, but in the spirit of understanding the benefits for people with disabilities and women, we will raise this issue again at the finance ministers' meeting. As the member well knows, we will have a triennial review. The next meeting is in December. The minister has stated publicly he will raise the issue, and it will be on the agenda. We want to make sure that this enhancement will benefit all Canadians.
We will always be listening to members in the House and Canadians to look at ways we can make further improvements, but let us remember that this is the right thing, right now, for Canadians.
Luc Berthold Conservative Mégantic—L'Érable, QC
Madam Speaker, my colleague spoke about the Liberal government's eagerness to hear what all Canadians have to say about the enhancements. However, once again today, the government has denied the opposition an opportunity to express its views. These are actually the views of the people who elected us to send a message to the government concerning its intentions with respect to Bill C-26.
This is the ninth time that the Liberal government has used time allocation since the beginning of this Parliament, and since it adopted its sunny ways. It was supposedly going to do things differently. However, it is now obvious that the Liberals do not like to listen to other points of view when they differ from their own and oppose the measures they want to adopt.
Does my colleague approve of the rather brutal way in which the government is muzzling members of the House in order to pass its bill?
François-Philippe Champagne Liberal Saint-Maurice—Champlain, QC
Madam Speaker, I appreciate my colleague's comments. However, he knows very well that I conducted budget consultations from Moncton to Yellowknife last week. The week before that we were in Ontario. I was in Saint-Constant, Quebec, in Mauricie, and then in Quebec City. We consulted Canadians and we will continue to do so because it is the right thing to do.
What is unfortunate, and the people watching at home will remember it, is that the Conservative Party voted against all the measures we introduced since we formed the government. The Conservatives voted against tax cuts for the middle class, they voted against the Canada child benefit, and they are preparing to vote against the enhancement of the CPP.
Essentially, these are good measures for Canadians, and we will continue to develop our agenda to help the middle class.
Cheryl Hardcastle NDP Windsor—Tecumseh, ON
Madam Speaker, we know the government has rejected the attempts by the NDP to fix this legislation, particularly for the people who will receive the CPP with the dropout clause included.
Will the government provide the chamber with an analysis of the financial impact on those who have been excluded from this legislation. I understand the government will be talking to the provinces about this, but the real question is, why was such an analysis not undertaken and provided to the chamber?
François-Philippe Champagne Liberal Saint-Maurice—Champlain, QC
Madam Speaker, I welcome the question from my colleague because it allows me to repeat what I said about the dropout provision.
First, we reached a historic agreement with the provinces. The member heard in my speech and will concur with me that this is a good thing for Canadians. The Canadians she and I represent in our ridings will benefit from that, especially the younger generation.
We have to look at the broader things we have done for people in retirement. We reduced the age of retirement from 67 to 65, and we increased the GIS top-up. Yes, we heard from the NDP and Canadians, and that is why the Minister of Finance has committed to put this issue on the agenda of the finance ministers' meeting, which I will attend, in the next few weeks. And yes, we will talk about that.
However, let us not forget what we are doing for Canadians. We are enhancing the CPP that would benefit all Canadians when they retire. That is what members are going to vote on today, and I am sure that Canadians and their children watching at home will remember the historic vote today.
Elizabeth May Green Saanich—Gulf Islands, BC
Madam Speaker, I want to pursue the question of my hon. friend from Windsor—Tecumseh to the hon. parliamentary secretary. I bemoan the fact that as we are now using time allocation for Bill C-26, one thorny point has not been adequately explained in this place.
I am looking for evidence that would tell me what happens with the drop-off provisions and how they will affect women, lower-income women, the ability to save for retirement, and taking time off for child rearing or illness.
Overall, Bill C-26 is a big step forward in expanding the Canada pension plan, but would the hon. member help me to see why the government has refused to accept what appeared to me to be reasonable amendments?
François-Philippe Champagne Liberal Saint-Maurice—Champlain, QC
Madam Speaker, I welcome the question from my hon. colleague. She knows I have enormous respect for her and the work she does in this chamber, providing a voice to a number of concerns. I must say that we have listened to these concerns.
This is a great step for Canada. We are taking a great step for Canadians. The member is asking if we can do more, could we improve, and we said yes. Our Prime Minister always said better is always possible.
Yes, we will bring that to the table with the Minister of Finance. This was a historic agreement that was reached in June. I would say that the member has been heard and we will put it on the agenda, because that is what people expect a responsible government to do, one that is always looking at ways to improve.
Let us not forget that what we are doing today is historic for Canadians. Decades from now we will remember the vote as being historic for the vast majority of Canadians in our country.
Larry Bagnell Liberal Yukon, YT
Madam Speaker, I thank the member for his fine speech.
We are doing other things to help seniors. I would like the member to tell us what they are.
François-Philippe Champagne Liberal Saint-Maurice—Champlain, QC
Madam Speaker, I thank my colleague who does an extraordinary job and who also listens to his constituents.
As he said, the announcement we just made is just one of the measures that we presented in budget 2016. The enhancement of the CPP is an important and historic step for Canada.
We have also implemented other measures. For example, as I was saying in an earlier answer, we changed the age of retirement from 67 back to 65. This is a very good measure for hundreds of thousands of Canadians, particularly Canadian women. As members know, women who are living alone in retirement are more vulnerable. We did the right thing for Canadians by bringing the age of retirement back to 65.
We also enhanced the Canada pension plan. Coming from a region that has known economic hardship, I can say that what we have done for seniors will have a direct impact on them today and in the future.
The Assistant Deputy Speaker Carol Hughes
It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Vancouver East, Immigration, Refugees and Citizenship; the hon. member for Nanaimo—Ladysmith, The Environment; the hon. member for Hochelaga, Housing.