Evidence of meeting #55 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was enhancement.
A video is available from Parliament.
5:25 p.m.
Liberal
The Chair Liberal Wayne Easter
We'll go on to another one, and you folks can think about that.
Next question, Dan.
5:25 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Thank you.
In regard to the earlier question from MP Ouellette about the additional payments, you said that doesn't apply.
I think, ma'am, you mentioned that social benefits, like disability, death benefits, and survivor benefits do not apply to that extra 14%. Is that correct? Did I read you right?
5:25 p.m.
Director, CPP Policy and Legislation, Income Security and Social Development Branch, Department of Employment and Social Development
No. This will apply.
5:25 p.m.
Conservative
November 14th, 2016 / 5:25 p.m.
Director, CPP Policy and Legislation, Income Security and Social Development Branch, Department of Employment and Social Development
The retirement pension, the survivors' pension, the disability pension, and the post-retirement pension are all enhanced with this. You will have your base CPP survivors' pension, and then you will have your two tranches of extra benefit, which is with your first additional contributions and your second additional contributions. They are like top-ups to your retirement pension. It will be the same for your survivors' pension. It will be the same for your disability pension.
5:25 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
They're putting more money aside, so Canadians can rest assured they will receive a larger death benefit or a larger survivor benefit at the end. Is that correct?
5:25 p.m.
Director, CPP Policy and Legislation, Income Security and Social Development Branch, Department of Employment and Social Development
I didn't mention the death benefit. I mentioned the survivors' pension. The death benefit is not included in the enhancement, and neither are the disabled contributor's children and the orphans benefits, which are lump sum benefits. These are social benefits, which are—
5:25 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Thank you.
Do you have an answer for the 480, or are you still working on it?
5:25 p.m.
Director, CPP Policy and Legislation, Income Security and Social Development Branch, Department of Employment and Social Development
With respect to the 480, I'll explain how the pension is calculated right now. Your pension is calculated on an average, using the number of months that you have in your contributory period from age 18 to the time you stop working or take your retirement pension. It's not an average per se. You always divide on 480 months, so that's 40 years. I said you get the best of your 40 years; you accumulate. If you contribute for 20 years, you will get 20-fortieths. If you contribute for 10 years, you will get 10-fortieths. You accumulate according to your contributions and your benefits.
5:25 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
You will get the full amount that's owing to you based on what you've put in. Is that correct?
5:25 p.m.
Director, CPP Policy and Legislation, Income Security and Social Development Branch, Department of Employment and Social Development
You will get the full amount that is owed to you according to your contributions.
5:25 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I just wanted to make sure that's there.
5:25 p.m.
Liberal
The Chair Liberal Wayne Easter
I'm sorry, but you're over time, Dan. You needed to get that clarified, so we gave you the extra time.
Mr. Grewal.
5:25 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair.
Thank you to the witnesses for coming today.
My question is at a macro level. The enhancements to the CPP have been very well received across the country. In your professional opinions, how will this help young Canadians? The example would be somebody graduating from university, who at 22 years of age gets their first job earning $45,000; then the same question for somebody who is 55 years old and is about to retire; and then for somebody at 64 years of age who is retiring next year.
5:25 p.m.
General Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance
Sure. Why don't I take a crack at it and others can complement.
We'll start with the youngest. Given the fact that the implementation period for this CPP enhancement starts in 2019 and leads up to 2025, it's really over a period of 40 years to 50 years that you see this improvement and maturing of the benefits. Someone who is 22, for instance, is at a good age to benefit from the majority of this enhancement. The idea is that this enhancement is really about improving the income replacement for future generations. A lot of this has to do, of course, with concerns about retirement plans, defined benefit plans, shifting out of workplaces, and the efficiency of having a CPP and being able to expand the CPP and the portability of it and so forth. If you're 22, you stand to benefit for almost the maturity, if not the maturity, over that period of time.
For someone who is 55, you will be able to contribute starting in 2019, and as it has been conveyed here, you will get out of it what you put into it in terms of a certain return and a certain benefit. Having said that, the amount that the person of 55 years will receive, the majority of the CPP payment that they get will be on the basis of the base CPP, because the enhanced CPP will not have accumulated as much income replacement for...given the fact that the person will have contributed for, I would say, less than about five years or so. It will depend on the age they retire and whether they want to delay their retirement and so forth.
For someone who is 64 years old who is retiring next year, it's a different situation. This is a person who will qualify for CPP, the normal age being 65, in their next year. So the CPP enhancement will be for younger generations. For that person, however, when you think of the total support that's being provided by the government, you have to look at it through the lens of the OAS, the move of OAS from 67 years to 65 years, the GIS support and top-up, depending on the income that the senior will be generating, and the broader package of middle-income tax cuts and so forth and where they stand there.
Often, for those who are 55 years or 64 years, you look at the support structure that exists now. There is a certain benefit that someone at 55 will get from the enhancement, but really it's about younger generations.
5:30 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Perfect. Thank you.
On the same thing, how does it affect employers?
5:30 p.m.
General Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance
On the employer side, the fact that this enhancement is being brought in on a gradual basis is key for employers. They're able to plan accordingly. If you think of it, right now it's 2016, and the maturity of the plan really kicks in at 2025. That's a nine-year lead-in to maturity for the plan.
5:30 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
It's safe to say that employers have more than enough time to plan accordingly and that disruptions in hiring decisions and profitability should be minimal, if anything?
5:30 p.m.
General Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance
That was certainly a consideration taken into account when the design was agreed to by ministers in Vancouver at the end of June.
5:30 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
I have a few questions for the actuarial folks. First of all, thank you for being here today.
Did you say that you do an actuarial on OAS?
5:30 p.m.
Director, Canadian Pension Plan, Old Age Security, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Yes, we do that every three years.
5:30 p.m.
Conservative