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

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Mr. Speaker, my question is for the member for Portneuf—Jacques-Cartier, my colleague from the greater Quebec City area.

Over the past year, the Liberal government has broken a number of its promises. My colleague also talked about the Minister of Finance, who has contradicted himself somewhat, in terms of his current policies compared to what he has written in the past.

I wonder if the member could comment on what he thinks of the Liberals' pattern of breaking their promises and abandoning the convictions they have expressed in the past.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Mr. Speaker, I want to commend my colleague whom I have the privilege of working with to represent the Quebec City region. My colleague is from a Quebec City riding. I do not want to cause any confusion. There is the riding of Québec, Quebec City, and the Province of Quebec. I want to thank my colleague for the question.

We are drowning in broken promises. Those members over there were elected on their promises. They fooled environmentalists, they fooled economists, and they fooled families. The only plan they have, and I dare not say it in the House, is a plan for something down the road that we will discuss when a certain bill comes before us in the spring. That is the only plan they have. That is not reassuring for the Canadian families who are working so hard every day to earn money.

I hope they will be given the chance to do what they want with the money they save. Give them the tools to do more. If they do more, there will be more and that will allow us to provide better social programs to Canadians.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, a strong pension system is a cornerstone of a decent society. Adequate pensions provide retirement security to those who build our country. Pensions reduce the extent to which seniors must draw upon other social welfare programs. When retirees spend pension income in their local communities, it provides an important and relatively stable source of consumer demand. Therefore, pensions are critical to our economy and to our broader society. That is why most other advanced countries have established robust universal public pension systems to cover all workers.

Even the United States set up a public social security system that is more generous than the current Canada pension plan. Here is Canada, I believe we made an historic error. We set up a public pension system only as a complement to workplace pensions. The CPP replaces only about a quarter of employment earnings, on the assumption that employees have another pension from their employers. That assumption has been severely tested in recent years, and I would suggest that the Canadian approach to pensions is actually very similar to the American approach to health care.

This reliance on the workplace for benefits has many pitfalls. Workers can lose benefits if they change jobs or if their employer goes bankrupt. The aggregate costs of administering separate plans in each workplace, or separate accounts for each employee, are far higher than administering a universal plan that covers all Canadian employees. In any case, we are at a point where only about one-tenth of private sector employees have a defined benefit pension plan in the workplace.

Of course, we can and must do more to safeguard workplace plans where they exist. One idea would be to enact a national pension benefits guarantee fund, as exists in the United States and at the provincial level in Ontario. This is something the Government of Canada could try to initiate for the whole country that would serve as a backstop to workplace pension plans.

However, the fundamental solution is to enhance the Canada pension plan to provide more defined benefit coverage for all Canadian employees, regardless of where they work. The CPP is universal, efficient, portable between employers, and indexed to inflation.

We in the NDP, and our allies in the trade union movement, have advocated doubling CPP benefits over time to replace half of employment income. The government's plan to eventually expand the CPP to replace one-third of employment income does not go far enough, but it is a significant step in the right direction. I am proud of the role New Democrats have played in the House to push the government to follow through on its promise to improve the CPP.

The federal-provincial agreement reached on the CPP is so reasonable that even Saskatchewan's right-wing premier, Brad Wall, signed on to it. To provide a bit of context, in the months before the deal, Premier Wall had been the shrillest opponent of expanding the CPP. When commodity prices were high, it was not the right time to enhance the CPP, according to Mr. Wall. When commodity prices were low, he again said that it was not the right time to expand the CPP. Indeed, in response to falling oil prices, Premier Wall's priority was to argue against improved CPP benefits rather than in favour of improved employment insurance benefits for laid-off resource workers.

There is quite a contrast with our neighbouring province in this regard. In Alberta, Premier Notley made a very strong case for extended employment insurance benefits. As a result, that benefit extension was provided to all Albertans. In Alberta, we had effective advocacy by the provincial government for better EI benefits.

In Saskatchewan, we had a right-wing premier going on a crusade against expanding the CPP. He completely ignored the issue of employment insurance. As a result, the government left half of Saskatchewan out of extended EI benefits and, even after having added the region of south Saskatchewan, it is still excluding Regina.

Workers in my city are paying the price for a lack of effective advocacy from our Premier. However, even though Premier Wall was so hell-bent on opposing an expansion of the CPP, even he came around to sign on to this important federal-provincial agreement.

It is really quite striking that premiers of all stripes, including a very right-wing premier, as I mentioned, have signed on to this reasonable compromise, and yet in this House, the federal Conservatives are opposing improvements to the Canada pension plan. I really think it speaks to just how out of touch the Conservatives are with the reality of working Canadians, that they alone are standing up and opposing any kind of enhancement of the CPP.

While I would certainly argue that this bill is an important step in the right direction, obviously it is not sufficient. Obviously, much more needs to be done to help current retirees and to help lower-income working people. We want to see the government do a lot more to improve the guaranteed income supplement for seniors.

I would note that, in the proposed bill, the enhanced portion of the CPP is actually a separate line on income tax. Might there be a way of exempting the additional benefits from the GIS clawback? That is just one idea that could perhaps help lower-income seniors.

Another idea would be to expand the working income tax benefit as a way of compensating lower-income employees for any cost of increased contributions. The government has said it is going to do this, but we absolutely need the details. We need to see something concrete for working Canadians.

On balance, I think this is a good bill. The NDP is going to support it. However, definitely the government can and should do more.

I would like to briefly respond to some of the points made in the last speech by my hon. colleague from Portneuf—Jacques-Cartier. He suggested that, instead of expanding the CPP, we should just increase the contribution limit for tax-free savings accounts. However, voluntary savings are not working. Canadians are not even filling up the TFSA contribution room they already have. That is why it is important to expand the CPP. Just further increasing the contribution limit to the TFSA would not help all the Canadians who are not meeting the current limit. It would just help the very affluent who have the extra money to put into that account.

In support of private savings, the member for Portneuf—Jacques-Cartier also made the point that those savings would be reinvested in the economy. However, the same is true of funds contributed to the Canada pension plan. Those funds would also be reinvested. While certainly savings and investment are important, that is by no means an argument against expanding the CPP.

As I pointed out in questions and comments, this money does not go into government coffers. Unlike the EI fund, the CPP truly is a separate fund with its own administration that does not appear as part of the government's budget.

In summary, this proposal is an important way of ensuring retirement security for all Canadian employees.

[Celina Caesar-Chavannes, Liberal, Parliamentary Secretary to the Prime Minister]

Mr. Speaker, I wonder if my colleague could further elaborate. He mentioned, and we know as a government, that Canadians are not saving, they do not have enough to contribute to a TFSA, and they are going to need to retire. Can the member expand a bit further as to why he thinks all the premiers have come together with our Minister of Finance to make this groundbreaking deal?

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, it is clear that Canadians are not saving enough for retirement. I do not think that is the fault of Canadians. It is the result of stagnant wages and insufficient employment income.

We in the NDP have proposed a number of solutions in this House, but clearly there is a lack of retirement savings, and as I mentioned in my speech, there is also a lack of workplace pensions. Only about one in 10 private-sector employees even has a defined-benefit pension in the workplace. In response to this lack of private savings and this lack of workplace pensions, what we need to do is expand the public pension system to ensure a decent level of defined-benefit pension coverage for all employees.

Of course, I wish the government had gone further in this regard, but it is clearly a sensible move and that is why all provinces are onside with it.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Mr. Speaker, my question for my colleague is this. Why is he ignoring the facts?

Eighty-three per cent of Canadian households are on track to maintain their current living standards in retirement, according to a study from McKinsey & Company. Statistics Canada is saying that the number of seniors living on a low income has dropped to 3.7%, among the lowest in the world. So there is not a retirement crisis. Why is the member ignoring the facts?

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, if the idea is that current seniors are not living in poverty, that might be true because current seniors often did enjoy good pensions in their workplaces. The problem is that many people who are currently in the workforce do not have workplace pensions and will not have security in retirement. That is why it is very foresighted to start phasing in increases to the Canada pension plan now, so that there will be better pension income for today's workers when they retire.

This is very much about the future. It is not about seniors living in poverty today; although, there are some seniors living in poverty today, and that is one of the reasons why it is so very important to improve the guaranteed income supplement as well.

[David Tilson, Conservative, Dufferin—Caledon, ON]

Mr. Speaker, I would like to make a couple of responses for the member from the NDP caucus.

Finance Canada people are the ones who advise the government on this type of bill, and did advise the government on this type of bill. They have made an analysis that shows that higher CPP premiums would hurt the economy. They say they would reduce employment. They say there would be fewer jobs per year for the next 10 years. They say they would reduce the GDP. They say they would reduce business investment. They say they would reduce disposable income. They say they would reduce private savings over the long run.

My question for the member is this. Having heard this advice from the people who advised the government that is putting this bill forward, with that advice should this bill proceed?

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, I appreciate the question, but what my hon. colleague has done is present a number of quantifiable statements without actually giving any numbers.

A critical question is by how much this increase in CPP contributions would reduce private savings. If every additional dollar of CPP contributions reduces private savings by 50¢, then there is still a net increase in retirement savings as a result. Really what the Conservatives would need to show to sustain this argument is that every additional dollar contributed to the CPP would remove a full dollar from private savings, and that is not at all clear, and the member has not even tried to make that claim.

It is also important to note that CPP contributions are indeed tax deductible, so there is actually a fairly immediate return to the contributor in that sense. They are also matched by the employer. The CPP is a good deal for Canadian workers.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Mr. Speaker, I am pleased to stand to speak to Bill C-26, an act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act, and the Income Tax Act.

What does this really mean, in layman's terms? It means that there would be a phased-in, mandatory, hike to the CPP premiums for both employer and employee. This hike would be as high as $2,200 per employee.

It is clear from this legislation that the government is not only trying to solve a problem that does not exist, in terms of our system, but does not trust Canadians to make decisions about how they best spend their own money. I think, actually, this bill should really be called the “Wynne bailout bill” or “Liberal election tit for tat” because we know that the Ontario government got itself into a really difficult position with some commitments in terms of what it was going to do with the retirement fund, and indeed, the federal Liberals had to come to its rescue.

I am going to give a few examples about the negative impact of this legislation but, first, I will talk about something that is important and that has been a bit lacking in the conversation we have had today. The tools they are going to use are our Canada pension plan and our Canada Pension Plan Investment Board.

Most Canadians are very aware of this pillar of our retirement program, but very few have much of an understanding of the underlying dynamics. Certainly when I was a young adult in the workforce, I knew there was something called CPP that was coming off my paycheque. However, the big rumour at the time when I was initially contributing was that this CPP was going to run out of money so I really had to worry about saving my own money anyway.

That clearly has not happened, but I think we are making assumptions about this plan, and I think we need to pay some attention to this plan and what it is all about.

I do want to draw members' attention to an October 17 article by Andrew Coyne. He raised some really important issues that have, again, as I noted, not been raised in this debate. I am going to spend a minute or two talking about the issues he raised, by quote or paraphrase, because I think they are absolutely critical and they represent concerns I have had over the last couple of years.

The first is that “CPP is supposed to be cheaper than private plans on account of its larger scale”.

Most Canadians have no idea, but costs at the investment board have increased, times 22, over the past decade. They have gone from $118 million to more than $2.6 billion. That is an absolutely enormous increase that has happened over just a short time frame.

At roughly 1% of assets, and that is not counting the distribution costs, the CPP is now significantly more expensive than most private exchange funds. I think the Liberals should be truly alarmed about that. This is something they need to get a handle on.

He goes on to say:

...the CPP doesn’t “help” you to save, it forces you to. If you’re already saving as much as you’d like to, it’s unclear why the government’s judgement should be substituted for yours; or if you’re already saving as much as you can afford to, forcing you to save more hardly makes you better off.

And so far as forced savings are justified, it’s never been clear why they must also be invested through the CPPIB....

The CPP II, as we will call it, is to be fully funded, and there are systemic risks that are associated with the portfolio as a whole. This fund has greatly increased these risks in the last years: 40% are now in private equity, illiquid assets like roads and bridges that are not traded on the public market.

Again, we have a pretty significant increase in the costs of managing this fund, and we have a very significant change in the risk portfolio.

There is nothing wrong with this if, one, all Canadians know what they are getting into; two, they can tolerate the extra risk; three, they have properly priced and accounted for it; and four, the returns are worth it.

The CPP, in Mr. Coyne's opinion, met none of these tests and for the 19 million contributors—perhaps they are like me when I was a young adult—it comes off our paycheques and we really do not know what is happening with the funds.

The first thing the Liberals have failed to do is look at what is happening and what they need to do about it. We should not blindly move forward in giving a greater monopoly to the CPPIB without some careful review regarding the rapidly escalating costs and risks. What we are creating is a bit of a monopoly in terms of forced government savings.

In addition to the concerns I have just raised, and I think I shared some important information, I would like to give a couple of examples of how this forced savings program would have some negative impacts. A lot of my colleagues have shared a number of examples, but I would like to talk about a few more.

Someone I know quite well has a technology firm that is doing exceptionally well, but it was a real struggle when he was getting this firm up and going. When he was first starting, there were times when he was concerned about making payroll. Like many entrepreneurs, he was putting a lot of energy in, but it took a while to see a return on his investment. It is a small company with a few employees.

We already know that the current government has chosen to raise the small business tax, so even if he was lucky enough to make a little bit of money, that was going to go up. That is money, typically, that would have been reinvested in the business.

Now he would also have, with 10 employees, an additional cost, and it could be $10,000. That $10,000 could be reinvested in the company to make it bigger and help it become successful. With that $10,000, perhaps the employees and the employer might have preferred to have some stock options. The employees could believe in the company, and in terms of their benefits packages, might think they would have more advantage with some other structure for receiving remuneration. Clearly, for that new business that is striving to make it, this is a measure that is going to create some real challenges.

I have some relatives, a young couple, who have been saving for their first home. They both graduated from university and are saving for their first home. They live just outside of Toronto. They had the down payment and were all ready to go, then all of a sudden, the mortgage rules changed. Now that the mortgage rules have changed, they do not qualify for the amount they need to purchase this home. Not only has the government changed the amount they are going to have to raise for a down payment, it is making it more difficult for them to save. They were putting a couple of thousand dollars a year away to pay off their student loans and buy their first home, but all of a sudden, they are going to have to divert some of the money they have chosen to do something else with into the CPP, the mandatory payments.

I could go on and on with examples of where this legislation is going to create a challenge.

In conclusion, I think the government is fixing a problem that does not exist. We have heard clearly that it does not exist. It is forcing Canadians to do something that perhaps is not their priority. We have entrepreneurs who could take that $1,000 a month, who are investors, who might have something else they could do with that $1,000, whether it is their own investment portfolios or investing in their businesses.

The Liberals are going to negatively affect the economy, and they have not fully assessed, in any comprehensive way in recent years, the escalating cost and the risk. I think the Liberals of today are very different from the Liberals of before. When CPP was first introduced, and we have heard this in the debate already, Judy LaMarsh, in 1964, stated:

It (CPP) is not intended to provide all the retirement income which many Canadians wish to have. This is a matter of individual choice and, in the government’s view, should properly be left to personal savings and private pension plans.

The Liberals need to really reflect on the path they are going down, and we should all have very significant concerns.

[Ken McDonald, Liberal, Avalon, NL]

Mr. Speaker, my hon. colleague mentioned the small business tax and the fact that it did not go down. As a former small business owner and an employer, I always felt that if one had customers with the money to hire a business to do the necessary work, one could grow the business from there, not by getting a very small tax break that the business would see very little of, because to enjoy that tax break, one would have to be profiting big dollars for it to take effect.

She mentioned workers being able to save for their own retirement and in another statement said that they are not able to save for the purchase of a home. I would like to know what she would say to seasonal construction workers, whether they be electricians, plumbers, or whatever, who are working without defined pensions from their employers and are moving to jobs here and there. What will they do when they decide to retire?

This is a good idea. They know they will have at least a secure Canada pension income fund to depend on.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Mr. Speaker, this is one of the arguments the Liberals have made. They talk about the increase they made to the small business tax and say that it is 1% or 2%. What they do not seem to realize is that if it goes from 9% to 10.5%, that is not 1.5%. That is closer to 10%.

Let me tell the member, who says he is a small business owner, that if all of a sudden his taxes were going up by 10% and payroll taxes were increasing significantly with an increase in Canada pension plan deductions, it could make all the difference in terms of whether the business was a success or could expand.

Do not just take my word for it. The Canadian Federation of Independent Business has clearly articulated that this is a concern for small business.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Mr. Speaker, in addition to the very negative impacts this CPP increase would have on small business and the economy, which my colleague talked about, a point I have not heard made today is the fact that to have a payroll deduction, one has to be on the payroll. I do not know what it is like in her riding, but in my riding there is 16.7% unemployment among youth, and the government is doing nothing to create jobs. I wonder if she could comment on that.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Mr. Speaker, that is an excellent point. I was recently in Calgary. I understand that there are 100,000 workers in Alberta who are unemployed right now, and we do not seem to be focused on that as an issue. We have a softwood lumber agreement that has not been signed, and we are looking perhaps toward some punishing trade wars. I could give example after example about creating the jobs we need.

The government said it was going to spend $10 billion to create jobs. It is now at $30-plus billion, and to be frank, we have not seen the job creation it promised with that approach.

[Jim Eglinski, Conservative, Yellowhead, AB]

Mr. Speaker, I am pleased to rise in the House today to speak to Bill C-26 and the Liberals' plan to expand the Canada pension plan.

This expansion would take more money from Canadians' paycheques, place more hardship on small businesses, and do very little for vulnerable citizens. Vulnerable seniors would gain little or nothing from the expanded CPP, as many have not contributed to the CPP and therefore are not eligible to receive CPP entitlements.

I quote from the Fraser Institute, through their colleagues, Charles Lammam and Hugh MacIntyre, who stated:

Instead of expending political energy on debating CPP expansion in the misguided belief that many middle- and upper-income Canadians are not saving enough for retirement, the focus of public debate should be on how best to help financially vulnerable seniors.

For low-income seniors who have contributed, an increase in CPP income could trigger a reduction in other government transfers, meaning little or no net increase in retirement income. If this plan goes ahead, the CPP premium rate will start rising in 2019, and the maximum level of pensionable earnings will go up from $54,900 this year to $82,720 in 2025.

According to a study by the Fraser Institute, this expansion will take money from Canadians, with little benefit in return.

Simon Gaudreault, chief economist at the Canadian Federation of Independent Business, stated that the agreement will have serious negative impacts on workers and the Canadian economy and that the announced changes, including increased contributions, may put Canadian wages, hours, and jobs in jeopardy.

Forcing Canadians to make higher contributions to the CPP will take more money from their paycheques. This means that they will have fewer dollars to invest outside the formal pension system and in private voluntary savings, such as RRSPs and TFSAs. This would result in little to no increase in total savings.

In addition to making it more difficult for Canadians to contribute to their TFSAs, the Liberal government has slashed contribution limits back to $5,500. Our government raised them, because it was such a popular program, from youth to seniors.

Our Conservative Party was proud to introduce the tax-free savings account that encouraged Canadians to be responsible in saving, and many Canadians have come to rely on these savings accounts when planning for their future. Tax-free savings accounts have provided Canadian families and seniors with a secure and flexible savings option that protects their money from being eroded by taxes.

The Liberals cut the limits for these savings accounts, and now they are taking even more money from the pockets of Canadians, making it difficult for them to use these accounts. The changes being made by the Liberals, in my view, will make life less affordable for Canadians who are trying to save for their vulnerable years.

Canadians should be able to manage their own money. With the out-of-control spending we have seen from the Liberals over this past year, they cannot trust the Liberal government with their pensions.

Vulnerable seniors will gain little or nothing from an expanded CPP. For low-income seniors who have made contributions, an increase in CPP income could trigger a reduction in other government transfers, such as the guaranteed income supplement. This would mean little or no net increase in their retirement income.

Our Conservative Party believes in reasonable, evidence-based policies that help Canadians retire with dignity, which is why the previous government expanded the guaranteed income supplement. The Liberals clearly agreed with this approach, since they increased the GIS by 10% in the first budget.

The Canada pension plan expansion may not effectively target those middle-income earners who are at the greatest risk of pension problems.

Employers and employees may decide to shrink their workplace pensions over their earning range when the CPP is newly expanded so the workers are not over covered.

An increase in payroll contributions after 2019 may result in a downward pressure on wages or employment. This would force Canadians to contribute more to the Canada pension plan, and would reduce their private voluntary savings. Canadians should choose how much they save and spend based on their income and preferred lifestyle.

The CPP tax hike will take money from the paycheques of hard-working Canadians, put hundreds of thousands of jobs at risk, and do nothing to help the seniors who need it today.

In 2013, the total household net worth of Canadians was $7.7 billion, split almost equally between pension assets, namely CPP/QPP, RRSPs, employer pensions, real estate equity, and other financial and non-financial assets.

A similar CPP hike scenario studied by the Canadian Federation of Independent Business in 2015 said that it would eliminate 110,000 jobs and permanently lower wages by nearly 1%.

Dan Kelly, the president and CEO of the Canadian Federation of Independent Business stated, “Two thirds of small firms say they will have to freeze or cut salaries and over a third say they will have to reduce hours or jobs in their business in response to a CPP/QPP hike”.

For the above reasons, I will not be supporting this bill.

Throughout my riding of Yellowhead in Alberta there are many unemployed people and many who are still working. Those who are working are the younger generation, many of whom who would look at the Canada pension plan and not trust that there would be funds there when they retired.

When we talk to financial planners throughout my area, we find that many young people, those who are just starting in the workforce and those who are already there, are putting money away for their retirement. They understand what it means to preplan their own destiny. Our government brought in the tax-free savings account specifically for those people who wanted to plan for their own future and use the money they could invest today, knowing that when they took that money out or when they retired, they would not be paying tax.

The difference between the Canada pension plan and the tax-free savings account is that people can put as much money as they wish forward. At the same time, our government gave them the option to make voluntary contributions to the Canada pension plan, which is what I believe should be in place today, rather than having to make greater mandatory contributions.