Bill C-26 (Historical)

An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act

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.

Canada Pension Plan

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Speaker, it is a very simple premise. Let us say people are working and earning low incomes. We would be taking money away for their consumption today. Maybe they want to hire a math tutor for their sons or daughters, or maybe they want to invest in going back to school, those kinds of things that make us wealthier and smarter down the road. They cannot access those. In fact, they have put that money into the future, where there will be other benefit programs like old age security and the guaranteed income supplement, which track with inflation. They are going to have more money down the road, but they have less money right now. That really cuts off their ability to do other things, like I said, in education or investments in themselves.

I have heard from young families in Summerland who are being told they cannot qualify for the larger homes that they have been saving for. This has been tough on young Canadians who want to start families and want the same benefits that many of us here have had.

[Cheryl Hardcastle, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, I am hoping that the hon. member can assure me that he understands that in order to pay for the increased benefits to CPP, the increases will have to be phased in gradually over a number of years. The reason we are doing that, as he stated, is that home ownership is threatened. It is threatened by precarious work, which I believe is one of the reasons the CPP enhancement is timely for the younger generation that is experiencing the precarious work reality.

I am wondering if he can reassure us that he understands the phase-in for this CPP enhancement.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Speaker, the finance minister has talked about precarious work, so I am glad that we are also talking about it.

First, if people do not have jobs, they cannot contribute to CPP. I just confirmed that the parliamentary budget officer still projects that this year's budget, which was set by the government to raise 100,000 new jobs, will only raise 60,000. There are less small businesses willing to hire young people because of things like CPP and carbon taxes.

I would love to be able to say that we are able to take these small amounts over time, which would be the logical thing, but that is not what is happening. What happens if there is another recession in five years when these things start to kick in full bore? Will the government actually rescind those things or will it be ideological? We just do not know. We do not know what the future is. I do not believe this is the best way to go forward, but I appreciate the member's point.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Mr. Speaker, the one thing that both the member and I understand is small business. I was a small business owner myself. We are doing a study on poverty in the human resources committee, and we always expect a certain demographic to pay more, but there is a point at which that particular individual or business just cannot do it. Eventually something occurs and the inevitable happens.

The Conservative government proposed an 11%, 10% to 9% small business low corporate tax rate because those are job creators. The member spoke a bit about the negative potential of this, but what could possibly happen if small businesses are simply taxed too much?

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Like I said earlier, Mr. Speaker, if they cannot sell to their customers at competitive prices, the customers will go elsewhere. Eventually, if they cannot find new customers willing to pay what their costs are, they will go out of business.

We talked about precarious work. What happens when it becomes too precarious for small businesses to employ young people? What happens when it becomes so precarious for larger corporations that they say the province or country they are in is no longer competitive? I am worried that there will be Canadian oil sands companies operating in Mexico and other jurisdictions rather than here in Canada. Why? We are not cost competitive and that is a shame.

[Cheryl Hardcastle, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, I am proud to rise to speak to this important issue today.

New Democrats were first to fight on behalf of an enhanced Canada pension plan in this century, launching a multi-faceted plan that would have ensured retirement security for Canadians back in 2009. While we are supporting the current level of enhancements, we nevertheless understand that for many retirees it will be inadequate. That is why we will continue to fight on behalf of all present and future retirees so that they can retire with the dignity we believe they deserve.

Canadian retirement income, and in particular enhancement to CPP, is one of the defining issues of a generation. Juxtaposed with the precarious work issue, we know Canadians are facing a retirement income crisis that must be addressed. The enhanced CPP would benefit a new generation of workers entering the workforce, but it would not alleviate the retirement income crisis of those who approach retirement.

An expansion of the CPP is the right way to modernize the retirement income system for the 21st century. The CPP is universal, providing pension benefits to all workers earning more than $3,500 throughout their working life. The pension benefits follow us from job to job and for periods of self-employment as well. These attributes are important, given that this is a generation of workers who are more likely to change jobs many times over their working lives and less likely to have a workplace pension plan. Add to the mix the proliferation of low-paying, precarious jobs, along with increasingly high student loans, and we begin to see that there is a real structural impediment to saving for retirement.

Given the urgency of this situation, it has always been difficult to listen with a straight face to the Conservatives declare that the CPP enhancement is a tax. A tax that pays us back later, is it? I do not think so. Like all real pensions, the CPP is a deferred wage. It is income that will be received later, and tax will be paid on that income later, by the way. It is disingenuous to continue referring to this enhancement to the CPP as if it were a negative, as if it did not matter that people would be in a better position to retire with financial security in the future.

Also, increasing the CPP now is a great way to diminish future reliance on the taxpayer-funded guaranteed income supplement, so this enhancement would actually be good for the taxpayer. Increasing CPP is largely a no-brainer as the plan performs very well and its administration costs are kept low. Low operating costs mean more of the money Canadians contribute through their CPP premiums gets invested, which means higher returns, which means more money for retirement incomes. The high administration fees charged by the retirement plans sold by the financial industry eat into future savings. In fact, an extra fee of 1% can cut into lifetime savings by as much as 25%. The typical fee charged for mutual funds in Canada, of 2.3% for example, can slash returns in half.

The CPP was created to be a universal pension program, meaning it belongs to everyone. Everyone pays into it when he or she works and everyone gets a pension from the CPP when he or she retires, fair and simple. The CPP provides a lifetime benefit that maintains its value over time as it is indexed. There is no need for people to fear that they will outlive their retirement savings or that those savings will be reduced by inflation as they age.

Currently, the CPP covers earnings capped at $54,900. For earnings up to the cap, the CPP aims to replace about 25% of the income. Therefore, the maximum pension comes in at about $1,092 per month, or $13,100 per year. Contributions are 4.9% for each the employer and the employee up to the same cap. The expanded CPP would be a new and separate tier. This tier would be added on top of the existing CPP. The new CPP tier would do two things, phased in over the next years to 2025.

First, it would take the replacement rate up to 33.3% from the current 25%. Second, it would expand the upper earnings cap from today's $54,900 to $82,700.

To pay for the increase in benefits, contributions for employers and employees would increase. This increase would be phased in between 2019 and 2025. There would be two tiers for the increase between 2019 and 2025. For those earning less than the yearly pensionable maximum earnings, which is currently $54,900 and would be adjusted each year, it would increase slowly to rise to an additional 1%. Those workers and employers would then be paying at a rate of 5.95%, up from 4.95%. In real numbers, this would mean that a person whose rate was set at the maximum would pay an additional $43 a month, as would the employer.

The Liberals claim that the maximum benefit under the enhanced plan would rise by 50%. Well, this is creative mathematics, as they get that number by using a faulty comparison. In fact, the maximum benefit would rise by 33%. The maximum a person can receive is now $13,110. That number is based on the maximum earnings that can be used to determine benefits, which is $54,000. Under the new plan, that person will receive $18,117, and that is in 2016 dollars, or a 33% increase.

The high cost of housing and drugs, the looming issue of the clawback of the GIS, and the indexing of pensions come immediately to mind as areas we need to act on quickly. Canadians from coast to coast to coast agree.

We are witnessing and experiencing the untenable pressure our seniors must bear. More must be done, because all of our seniors deserve to live with dignity. We need immediate action to help those seniors and seniors on the cusp of retirement who will not benefit from these changes.

Let us build on the momentum of this agreement and take the next steps to improve long-term retirement security for today's workers. Social justice advocates, including the labour movement, have done a tremendous job in laying the groundwork for this agreement. I am so proud of the work they do in my riding to advance our social conscience.

It is in that vein that I raise a profound concern about how the enhanced CPP contributions will be managed and invested. The Canadian Pension Plan Investment Board must diligently examine its areas of investment, including resource extraction in developing countries. The Norwegian pension plan investment board, for example, withdrew from all such portfolios because of human rights concerns.

As Canadians, we need to stand up to cavalier attitudes that suggest that this is how business is done. We must begin to think of the human consequences of our activities around the world, and where businesses behave in a predatory and exploitative fashion, I believe we should withdraw our investments in those areas forthwith. Canada has a social responsibility for our seniors and a responsibility to ensure the corporate social responsibility of Canadian companies in other countries, as well.

In closing, I would like to say again that the proposed changes to the CPP are welcome. They are expected by Canadians who have high expectations of our government. However, they are also an inadequate response to the retirement plight of working Canadians. For a government that prides itself on legislation that is fact based, it must go back and examine the facts.

In a society such as Canada's, where retirement security is built on the premise that employer-provided workplace pensions perform a significant portion of retirement security, along with personal savings and public pensions, it should be clear that the present system is broken and will not be fixed by the changes to the Canada pension plan alone that are being debated here today.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, I think it is important to reinforce that what we are really debating today is a historical moment in which the provinces came together under strong federal leadership to agree to increase the CPP for the betterment of working people today.

I appreciate the comments by the member that we have to think that when people retire, they have a nest egg. I am very appreciative of the fact that New Democrats are supporting this particular piece of legislation.

Could the hon. member comment on another major aspect of the measures taken by the Prime Minister and this government, the significant increase in the guaranteed income supplement? Many single seniors will receive $900 more, lifting thousands of them out of poverty. Would she comment on that because the pension issue goes far beyond the CPP itself.

[Cheryl Hardcastle, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, I wholeheartedly agree with the member that CPP is just one part of a larger issue.

In terms of the GIS, I think this would be an opportune time for the government to ensure there will be no future clawbacks on the GIS when the CPP increases come in.

Let me go back to something the member described about the guaranteed income supplement. When we raise people out of poverty, let us picture it as a line. How far are we raising people out of poverty? How far do we raise them with GIS? Those same seniors are struggling to decide whether they should be paying a hydro bill or paying for medication.

We have lots of working seniors, the so-called healthy and lucky ones with workplace pensions, who are still struggling.

If we are serious about the structural change that needs to take place, the next thing to tackle for seniors is pharmacare.

[Ted Falk, Conservative, Provencher, MB]

Mr. Speaker, I appreciate the concern of the member for Windsor—Tecumseh for the economic welfare of folks who are retiring and to make sure they have adequate funds to retire with comfortably. However, she is wrong when she says an increased CPP is not an additional payroll tax. If something is being forced upon an employer to remit to the federal government on behalf of an employee, which is what this increased CPP will do, it is an additional tax legislated by the House and forced upon employers.

I know the member has a great appreciation for people's ability to retire comfortably, but at what point are we pushing the real job creator or our country, our small to medium sized enterprises, too hard? At what point have they contributed enough?

[Cheryl Hardcastle, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, first I am very disconcerted to hear a respected member's alarmingly narrow definition of a tax, because this is not a tax.

I was raised in a small business family. I have a family that dutifully invested and was devastated during the recession. I also understand the regulatory environment we have today for garnisheing wages. This CPP is exempt from that. Everything from student loans to GST to family support is garnisheed based on an individual's cash flow, what they are taking home, which is very important if people are to save for retirement.

In the hon. member's social circle it may not be an issue, but this is extremely relevant in my riding. Small businesses in my riding, the BIAs in Windsor—Tecumseh, have advocated and have talked about how they struggle, and about the stigma attached to their financial struggle when the narrative becomes, as I have heard over and over today from the other members, that they have made bad choices, that it is their fault. We cannot do that any more.

We need a structural change, and the way to address it is to look intelligently and meaningfully at other changes that need to take place, but when it comes to the CPP, do not do a disservice to those same small businesses. Do not call it a tax.

[Robert Gordon Kitchen, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, thank you for the opportunity to speak to Bill C-26, the enhanced Canada pension plan that the government has introduced. While it might seem laudable that the government wants to improve the public pension that future generations may possibly collect, it is odd that it has chosen to increase the payments made by Canadians today so that potentially one-third of a person's retirement income 40 years from now will be provided for by the government.

This makes one question why the government feels compelled to increase pension benefits for future generations. By the current government's own actions today, through deficit financing, it will imperil the ability to save for the future because of the increases in taxes that its reckless deficit spending must entail. If we have to pay someone else's bills first, it is hard to save for ourselves. I have watched the government as it spends billions of taxpayer dollars today with little regard for where this money comes from, how it will be repaid, and what sort of damage this reckless spending will cause these very same retirees that the enhanced CPP is promising to help in the future.

By its own admission, the government wants to increase the monies it collects for workers today for the CPP because there is a belief that not enough Canadians have a pension plan at their work and/or that Canadians are not saving enough of their own resources for the future. Let us explore these beliefs.

Whether it is a defined benefits plan or a defined contribution plan, both of which are paid for by the employer and employee, nearly 50% of Canadian workers do not have an employer-provided pension plan at work. This may seem like a high number, and perhaps it is if we believe it is the obligation of the employer to provide a pension on top of a reasonable wage, vacation time, sick time, and a balanced work life—and the list goes on of what an employer ought to be responsible for. However, if nearly 50% of Canadian businesses are small businesses that employ between one and four people, it may seem a bit onerous on a small business to offer an additional pension plan to its one or four employees. Of these workers, 100% contribute to the CPP. Therefore, every worker in Canada does have a pension plan, yet some may have a much better plan than others. The argument that not enough Canadian workers have a pension plan at work is really an argument based on envy, that some have a better plan than others, and that it ought to be rectified by forcing small businesses to pay more for the future of their employees, some of whom may remain for one year and some for a lifetime.

I am confident that most Canadians agree that some form of a public pension plan is of benefit to society as a whole. I think the potential disagreement comes from just how much their pension should be worth, and by whom it should be run

The math behind the enhanced CPP is based on raising the contribution rates and the ceiling at which those contribution rates apply to our public pension scheme to enhance the CPP of all Canadian workers. I am not certain this math is convincing. Current estimates show that the CPP at present provides a real rate of return of approximately 3.6% and that this will decrease to around 2.1% for those retiring in 2037, according to the Fraser Institute. Currently, the average Canadian worker contributes 4.9% of his or her income to the CPP. This will increase to 5.95% based on the proposed CPP enhancement. The employer provides the same contribution. This current total contribution is 9.9%, and will rise to 11.9% of one's earnings to a maximum amount. The average Canadian wage is $48,200. Therefore, an expected contribution of $4,800 per year is invested in a pension scheme for the average Canadian worker. At the age of 65, this same worker can expect to obtain a maximum pension from the CPP of approximately $1,000 per month. However, because that worker's average wage is less than the pensionable maximum, he or she will only receive approximately 75% of that amount.

Today, the average CPP payout in Canada is $642 per month. If this same worker earning the same average wage contributes his or her enhanced 5.95% CPP allotment into his or her retirement plan and earns the same rate of return of 3.6% for 45 years, the amount of time needed to obtain the maximum payout from CPP, he or she would be able to use these funds to pay his or herself the maximum amount of $1,000 per month for at least 40 years and still have money left over at the end of this time of approximately $220,000. If we add in the employer portion, then there is now an 11.9% contribution, and the maximum return is more than attainable.

We know that the return is not exact. The worker earning the average wage of $48,000 per year, who should be able to generate $1,000 per month return from their own 5.95% contribution over 45 years, now needs to factor in how the overall employee-employer contribution of nearly 12% will go to covering such things as administrative fees to manage the money, the maximum $3,500 tax credit for the contribution rebate, and the extra funds that go to those who earn less than the average industrial wage.

The argument that not enough Canadian workers have a pension plan at work is in fact not correct and speculative at best. If the CPP is in fact a pension plan, then it really comes down to how that pension plan is being administered.

The second item I would like to address is the belief that some Canadians are not saving enough on their own, so by taking extra funds from their paycheque for an enhanced CPP contribution each month, the government is going to be doing them a favour. If I have limited resources and the government takes more of my resources in order to obligate me to settle for something second-rate, then of course I am not going to be able to save as much of my limited resources since they have already been taken by the government.

The C.D. Howe Institute examined four pillars for sources of income for retirement in exploring why the government wanted to enhance the CPP. The first source is government transfers, such as OAS and GIS. The second is the CPP. The third is employment pensions. The fourth is other assets, such as real estate, financial assets, private business, life insurance, inheritances, and essentially, any asset not managed by the government. If the government is truly convinced that it is going to improve the lot of the middle class, then this fourth pillar needs to be paid more attention in a positive manner.

Unfortunately, the government has seen fit to, instead, meddle in this income source through reducing the tax-free savings account limit, trying to cool the housing market, failing to reduce small business taxes, imposing a carbon tax, and enhancing the CPP. This will unduly impact the overall burden on some business activity in Canada by increasing the contribution rate that employees, employers, and the self-employed will have to come up with to meet the government's solution to a problem that is beyond them.

Taking money from hard-working Canadians' paycheques will make it harder for families to save for such things as vacations, children's post-secondary education, and purchasing a home. Likewise, employers will have to choose between hiring that extra hand or requiring their employees to do more for less.

We know that sunny ways in Canada means that the government wants to manage all aspects of how we live as Canadians, from cradle to grave. We know that there is nothing the government does not want to poke its nose and legislation into.

The enhanced CPP proposal is simply another tax to address a problem that really is not a problem. If we look at how society functions and decide there are specific items that a government ought to be responsible for, such as promoting rule-based free trade, ensuring the security of our communities both internally and from activities abroad, or allowing for the free movement of goods and people internally in Canada, then determining how much someone receives in retirement or insinuating that one person's pension is better than another's, and that is somehow bad, seems to be the least of our concerns.

In conclusion, let me finish by quoting Hendrik Brakel of the Canadian Chamber of Commerce. On May 31, 2016, he stated:

...we’re worried a big tax increase is headed for the middle class like an elbow to the chest....This comes at the worst possible time—an economy reeling from weak commodity prices and slower consumer spending will be lucky to eke out growth of 1.5% next year. It’s difficult to stimulate the economy while pulling money out of the pockets of Canadians.

The government talks a big story and loves to use the catchphrase, “Helping the middle class and those who are struggling to join it”. Between the carbon tax and the CPP tax, that elbow to the middle class has bounced off the chest and is now a hit to the head.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, in listening to the speeches today about the CPP, it has become very obvious that everyone will understand why the Conservatives lost touch with Canadians. Canadians want to see a strong and healthy pension program, whether it is the GIS, the OAS, or the CPP. The Conservative Party still believes there is no room for improvement to the CPP, even though the provincial governments and many different stakeholders came to the table. Strong national leadership led to a historical agreement.

Why are the Conservatives are so out of touch with what Canadians and other provincial jurisdictions have called for at this time when we should be celebrating a historical agreement which will help so many retirees in the future?

[Robert Gordon Kitchen, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, the Liberals are so keen on studying everything and talking to everybody, but the people they have not talked to is the CFIB. The CFIB has indicated that 70% of small business owners disagree with that notion. Therefore, I do not know how the member can say that they have engaged with everyone when small business represents such a big, important factor of this economy and generates a significant amount of employment and jobs. By creating those jobs, we have more people contributing to the CPP.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Speaker, I congratulate my colleague on an excellent speech. It is interesting to hear my colleague across the way talk about this apparently being a historical agreement. I do not think it is even a historic agreement.

The government has tried to bring together other levels of government in a government knows best approach. What we are hearing from ordinary Canadians, from business owners, is that they do not want to have to pay more in tax. They want to keep more of their own money. That is the approach that we advocated. Could the member talk about why we are better off by giving people the mechanisms to save for themselves?

[Robert Gordon Kitchen, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, I thank the member for all the good work he has done.

Small business is the backbone of our country and small business includes our agricultural industry. Our farmers are out there working day in and day out. They have been fighting to succeed and get their products to the market. The Liberals put forward a carbon tax and now they want to put another tax on farmers. Farmers employ people and they will continue to pay the CPP for these individuals. There again, it is another tax that is being added to the farmers. How are they going to find the labourers and people to work for them?