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

[Greg Fergus, Liberal, Parliamentary Secretary to the Minister of Innovation]

Madam Speaker, I would like to thank the hon. member for his interesting speech. I am certain that it was heartfelt and he represents his constituents well.

However, he raised so many questions that I could not resist the opportunity to ask some questions back to him, or at least share some of the observations I made back in my own riding during the election. One is that he mocked the idea that Canadians are supportive of putting a price on carbon pollution.

I did not have a safe riding. I had to work very hard to win the riding. We spent many months, my team and I, knocking on 35,000 doors. I heard over and over again from people that they wanted two things. They wanted Canada to take a leadership role again on the international stage, which meant re-engaging with the commitments we made to deal with respect to the environment. Many times, people brought up the notion of carbon pricing. The idea is very simple, at least in the case of British Columbia: “Keep your taxes, keep your profits, but if you cause pollution, you pay for it.”

I just want to reassure the member that certainly was the case in my riding of Hull—Aylmer.

[John Barlow, Conservative, Foothills, AB]

Madam Speaker, I have a lot of respect for my colleague. I just want to say that I think all of us worked very hard in our ridings during the election. I hope he is not insinuating that some of us have safe ridings and are not in contact with the feelings of our constituents.

I am sure some of the constituents in his riding were talking about a price on carbon. I wish they would just say what it is. It is a carbon tax. This “price on carbon” I find ridiculous. For anybody who says the famous last words of any government are revenue neutral, I think we all know that is not going to be the case.

When he was going around to his constituents, did he tell them that it was going to be $50 a tonne? Did he tell those people at the door it was going to be 11¢ a litre on gas and another 14¢ a litre on diesel? Did he tell them that? Did he tell them, “Actually, it's not going to be the businesses that cause the pollution that are going to be paying for that carbon tax. It is going to be you paying for that carbon tax”?

Did he talk to the farmers and ranchers in my riding who are seeing their fuel prices double because of the carbon tax? This is not an area where I have public transit and my residents could take a bus. The carbon tax is going to be extremely painful for rural Canadians.

[Karen Vecchio, Conservative, Elgin—Middlesex—London, ON]

Madam Speaker, I can totally empathize with him, because during the 2008 global recession, in my own community, there were huge job losses. We saw over 6,500 jobs lost in the St. Thomas area and region. I completely understand the member's concern for his constituents.

When I listened to the government speakers, I recognized that they are really confusing the Canada pension plan with what they are doing for seniors on old age security and GIS. I want to make sure that we separate those two things. They are two different pillars of retirement, so I do not want Canadians to get confused with GIS and the CPP. I just wanted to make that statement..

We talk about the CPP investment, as they are calling it, and one of my greatest concerns is that, if we are going to see job losses, we are not going to see our youth who are just graduating from colleges and universities and our young families having jobs. They will not be able to pay into the CPP anyway because to pay tax they need to have a job.

I am just wondering what his thoughts are on how we are going to help those young families and those young students get on a path so that they can have economic independence.

[John Barlow, Conservative, Foothills, AB]

Madam Speaker, I want to thank my colleague, the member for Elgin—Middlesex—London, for a great question and for all the advocacy she has done for her riding, and especially, for young Canadians.

My answer would be that this is absolutely backwards. Not only will these young people have a tough time finding jobs, but because they are paying into this, they will have a very difficult time repaying their student loans or saving for a first home. Youth unemployment now is at more than 16%. It will be much worse and they are going to have a much more difficult start to their professional lives.

[The Assistant Deputy Speaker, Carol Hughes]

The member will have a little over five minutes left in questions and comments the next time this matter is before the House.

It being 1:30 p.m., the House will now proceed to the consideration of private members' business as listed on today's Order Paper.

The House resumed from October 21 consideration of the motion 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 second time and referred to a committee.

[The Assistant Deputy Speaker, Anthony Rota]

There are five minutes remaining for questions and comments for the hon. member for Foothills.

The hon. member for Winnipeg North.

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

Mr. Speaker, one of the things that we know is very different, between the former Harper Conservative government and what this particular Prime Minister and the Government of Canada are trying to do here, is the issue of Canada's pension plan.

The former government did not recognize and did not listen to what Canadians really and truly wanted. It was completely out of touch with Canadians and did not recognize the importance of pension programs, in particular with respect to the CPP.

What we are debating today is a piece of legislation that, if passed, will be somewhat historic in the sense that we are going to see increases to CPP, working in collaboration with the many different provinces from every region of the country. At the end of the day, the biggest benefactor is going to be the worker, and the worker who is going to be retiring in the future.

Why is the Conservative Party still so out of touch with what Canadians really want when it comes to the issue of retirement? Why will the Conservative Party not support the bill?

[John Barlow, Conservative, Foothills, AB]

Mr. Speaker, I find it quite ironic that the member is saying we are the ones who are out of touch. Who did the Liberals actually consult before imposing yet another tax increase on Canadians? They did not consult anybody before the carbon tax. They did not consult anyone before changing the mortgage rules. They did not consult anyone before increasing the CPP tax hike.

I have certainly heard from constituents across my riding and from people across the country. Certainly during the election, while knocking on doors, I did not have a single person tell me that they really wanted to have their taxes increased on CPP and to have a carbon tax, and that was what they were looking for.

We had the tax-free savings account, which Canadians really appreciated. That is what I heard when I was knocking on doors, that people really appreciated the increase in the tax-free savings account, something the government, once again without consulting Canadians, decided to claw back and take away, imposing its own tax increase on Canadians.

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

Mr. Speaker, I certainly appreciate the quick footedness of my colleague. I would like to ask him a question.

The Canadian pension plan, depending on which accounting method is used, has a shortfall deficit of between $8 billion and $24 billion. The changes the government has put forward will do nothing to alter that. Does the member think that the government is simply moving ahead ideologically and not looking at actual improvements to help keep the system on a stable and solid basis for Canadians?

[John Barlow, Conservative, Foothills, AB]

Mr. Speaker, I want to thank my colleague for that question and all the hard work he has done, and to congratulate him on his new post as deputy critic for finance.

These changes are not going to do anything for Canadians right now. For seniors, baby boomers moving into seniors, this is something they will not feel for years, if not decades down the line. All this is going to do is increase the already exploding deficit that we have.

The impact in the short term is going to be that business owners are going to have to cut back hours and will not be hiring people. In a very low-growth time, this is something that is going to cost business owners and Canadians more than $2,000 a year. When we are seeing growth predicted at maybe 1% or 1.5% over the year, we need to encourage business owners to hire and grow. This is absolutely the opposite. This will discourage them from growing and hiring.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Speaker, I will be splitting my time with the member for Winnipeg South.

Our government is committed to strengthening the backbone of the economy, the middle class, and those working hard to join it. It is with this commitment that our government has delivered on a number of platform promises that were made to hard-working Canadians.

I am proud to stand and 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. This legislation would strengthen Canada's pension system and was a key promise we made to ensure a secure and dignified retirement for all Canadians. I congratulate the Minister of Finance, who delivered on this commitment by working in close collaboration and common purpose with our provincial and territorial partners.

It must be noted that provincial leaders of every major political party, Liberal, New Democratic, and Conservative, worked diligently on coming to this historic agreement that would benefit generations of Canadians, including my two young children, Natalia and Eliana.

What is at stake is simple. We must strengthen our pension system to reflect the realities that exist today and ensure a dignified and secure retirement for all Canadians.

To start our discussion on the proposed legislation, I believe it is best to review Canada's retirement system as it stands today and why a strengthened CPP is required to address trends that are leaving so many Canadians unprepared for their post-work years. Today's multi-pillared system includes old age security and the guaranteed income supplement, which are paid out of general government revenues and act as a basic income floor for low and middle-income Canadians. The CPP and QPP are funded through mandatory employer-employee contributions, and, in the 1990s, the CPP shifted from a pay-as-you-go system to a pre-funded platform. Finally, we have private workplace pensions and discretionary individual savings, including tax-free savings accounts and registered retirement savings plans.

Despite this multi-pillared approach to the retirement system, a number of trends are emerging that are leaving millions of Canadians unprepared for retirement and potentially facing a material drop in their standard of living.

Extensive analysis conducted by the finance department found that around one-quarter of families nearing retirement, approximately 1.1 million families, are facing a drop in their standard of living. Furthermore, it is estimated that as many as five million Canadians do not have access to a workplace savings arrangement, and many of these middle-class Canadians are at a greater risk of under-saving for retirement. We must act to ensure that all Canadians have a secure and dignified retirement.

In addition, younger Canadians today face circumstances not faced by prior generations in terms of saving for their retirement. Canadians now entering the workforce will face the prospect of changing jobs several times in their lifetime, and a portable pension plan that facilitates job mobility is now a necessity in this changing job market.

Since the 1970s, we have seen a material decline in the overall participation in private sector registered pension plans, as well as an ongoing shift from defined benefit to defined contribution plans. Statistics Canada estimates that total private sector workplace registered pension plan coverage has declined from 35% to levels now approaching 20%. Frankly, fewer private sector companies are offering workplace pension plans, and many companies have closed or wound up their defined benefit pension plans.

Defined contribution plans are not in their exact nature true pension plans, as they expose individuals to investment risk and swings in the beneficiary's pension plan assets, and a subsequent shortfall in pension savings. Also, a low interest rate environment, which influences the present value of liabilities and has placed cash flow demands on companies to maintain solvency ratios, combined with, frankly, unfavourable accounting rules on pensions, has hastened the move by many companies away from defined benefit pensions.

Our government, in collaboration with the provinces, has taken a carefully targeted approach with this legislation to address the issues I have laid out while striking the important balance between short-term economic considerations and long-term economic gains.

What does an enhanced or stronger CPP mean for Canadians? Quite simply, it means a secure and dignified retirement for millions of Canadians. It means that individuals retiring can worry less about making ends meet and more about spending time with their loved ones, including grandchildren.

Once fully in place, this CPP enhancement would increase the maximum CPP retirement benefit of approximately $13,000 by up to 50%. In today's dollar terms, the proposed enhanced CPP represents an increase of nearly $7,000, to a maximum benefit of nearly $20,000.

The enhancement in this legislation would do two things to make this happen for contributors. First, it will increase the share of annual earnings received during retirement from one-quarter to one-third. This means that individuals making $50,000 today over their working lifetime would receive approximately $16,000 per year in retirement instead of the roughly $12,000 today. Second, it would increase by 14% the maximum income range, to approximately $82,700, so that those who earn more would receive more in retirement.

Enacting these changes with Bill C-26 would result, as estimated by the Department of Finance, in a reduction of families at risk of not having adequate retirement savings by one-quarter, from approximately 24% to 18%, when we consider all pillars of the retirement income system.

To ensure that these things are affordable, we would phase them in over seven years, starting in 2019 through to 2025, so the impact is minimal and gradual. As noted by David Dodge, former governor of the Bank of Canada, “The fundamental challenge [facing decision-makers] is how to provide for adequate retirement income for the future population of elderly people without imposing an undue burden of taxation on the working population and the business sector.”

We have struck this right balance. For example, an individual with earnings of $50,000 will contribute about $6 more a month in 2019, and by the end of the seven-year phase-in period, contributions for that individual would be about $40 per month. Additionally, and this is very important, we would ensure that low-income Canadians would not be financially burdened as a result of the extra contributions. We would enhance the working income tax benefit to roughly offset incremental CPP contributions with little to no change in disposable income, while still securing higher retirement income for low-income Canadians.

A strong CPP will be good for Canadians, and will also be beneficial to the Canadian economy overall. As estimated by the Department of Finance, greater CPP benefits would increase spending by retirees, providing for a boost to economic output. It is estimated that GDP would increase slightly, from 0.05% to 0.09%, and employment levels are projected to be permanently higher, by approximately 6,000 to 11,000 jobs, based on 2015 levels of employment. In addition, higher aggregate saving rates through enhancing CPP would increase the amount of capital available for investment.

The Canada pension plan is a solid program, and actuarially sound. It is fully funded for future generations. The most recent report noted that 5.3 million Canadians received approximately $38.7 billion in payments while contributions totalled nearly $45 billion. It cannot be understated just what advantages the CPP offers. The CPP as a retirement vehicle for Canadians is, in my view, a model for the world. These advantages include that CPP provides a secure, predictable, and stable benefit. Canadians will not outlive their savings, and benefits are not subject to shocks. CPP benefits are fully indexed to prices, so inflation will not reduce the value of a pension. CPP is fully portable, and it fills the gap of a decline in workplace pensions. Overall, CPP is an efficient way to save.

Finally, the CPP Investment Board operates at arm's length from the government, with a mandate to invest CPP funds in the best interests of plan members. It is a model that is independent, transparent, and accountable. It is well regarded around the world for its impressive record of investment performance and management excellence, with a 10-year annualized rate of return of 6.8%.

In closing, Bill C-26 is the next step forward in ensuring that all Canadians retire in a secure and dignified manner. I ask my colleagues to join with me in advancing this important piece of legislation that was brought forward in a collaborative approach between the provinces and the federal government.

[Mark Warawa, Conservative, Langley—Aldergrove, BC]

Mr. Speaker, I want to thank the member for his comments. I listened intently.

A tax is a tax is a tax, and this is a new tax on the Canadian economy that would hurt business, hurt jobs, and would actually take money out of the pockets of Canadians.

I would like the member to comment on this quote: “Whatever the reason might be to expand CPP, it is not to eliminate poverty.” That quote is from a book written in partnership by the finance minister. In his speech, the member said that this is to help low-income Canadians, yet the finance minister said it has nothing to do with that. Again, a tax is a tax is a tax. If the member would comment, does he agree with the finance minister or disagree with him?

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Speaker, we increased the guaranteed income supplement by approximately $947 in budget 2016, and that is going to help approximately one million Canadians who are the most vulnerable of the vulnerable. In addition, with the enhancement of the CPP, the working income tax benefits will be worked in such a manner that low-income Canadians will be left better off with the imposition of the enhanced CPP than they were prior, and that will assist them in moving out of poverty.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Speaker, I think about seniors in my riding who are struggling to make ends meet, What comes to mind is that I met a woman during the campaign who had to make a choice between buying food or buying medicine. These are the challenges that pensioners are facing right now. I met another woman who had gone to the food bank for the first time. I also went to the Port Alberni homeless shelter recently, and they said they had seen a skyrocketing number of seniors there.

Could the member elaborate on how this enhancement is supporting those people? We look at the most recent figures available, which show that 30% of single elderly women live in poverty. That number has tripled in the last 20 years. Only 4.5% of female CPP recipients receive the maximum benefit compared to 18% of men. How will this CPP enhancement plan lift vulnerable elderly women out of poverty?