Mr. Speaker, today it is my privilege to table draft legislation that secures the future of the Canada pension plan. These measures are the result of the review of the Canada pension plan which the federal and provincial governments have conducted over the past year.
As joint stewards with the provinces, we are obliged to do all we can to make sure that the plan is there for Canadians, those who retire and those workers who become disabled during their careers. We believe that Canadians should be able to count on Canada pension plan benefits and that is why we have worked so hard to make sure that they can.
The problems facing the CPP are fundamental. The chief actuary of the plan has shown that, without changes, the CPP fund will run out of money in less than 20 years. Without changes, contribution rates would have to increase from under 6 per cent today to over 14 per cent to cover escalating costs.
In other words, younger generations would have to pay more than twice as much as now-and get no more for it. This is not fair. This is not affordable.
The problem, quite simply, is that the Canada pension plan, as it is now, is not sustainable in the longer term at costs which are fair to future generations of Canadians. This has led some to say that we should dismantle the CPP.
Let me say unequivocally that neither the federal government nor the provinces believe that anyone would be well served by that. Nor do Canadians. They told us during the public consultations that we and the provinces held across the country last spring that they want the Canada pension plan preserved.
Canadians asked their government: first, to preserve it; second, to strengthen its financing; third, to improve the fund's investment practices and reduce its costs. In other words, they said not tinker with the CPP. Make sure it is there for us. That is exactly what we have done.
The options we have considered in the course of our review required difficult choices, but we have come up with a strong and balanced package that will ensure the Canada pension plan is there when Canadians need it. We have done this in a way that has preserved a number of important features Canadians asked us specifically to protect.
All retired pensioners or anyone over the age of 65 as of December 31, 1997 are not affected by the proposed changes. Anyone currently receiving disability benefits, survivor benefits or combined benefits is also not affected. All benefits under the Canada pension plan will remain fully indexed to inflation. The ages of retirement, early, normal or late, remain unchanged.
Let me outline what has been done. The agreement makes a fundamental change in the financing of the plan. It would move from pay as you go to fuller funding to build a much larger reserve. The fund now is equivalent in value to about two years of benefits and is declining. With fuller funding, it will grow to about five years of benefits. It will be invested in a diversified portfolio of securities to earn higher returns and to help pay for benefits as Canada's population ages.
Canadians also told us to stop giving governments exclusive access to CPP funds. We have done that. Governments have agreed to limit their access and to pay interest at market rates. Canadians told us we should not allow contribution rates to go over 10 per cent. We heard them.
Contribution rates will rise over the next six years to 9.9 per cent and remain steady thereafter. This is far less than the projected rate of over 14 per cent that the chief actuary said would have been required if these changes had not been made.
Several measures have made it possible to keep contribution rates to 9.9 per cent. Let me mention a number of them. The year's basic exemption, the first $3,500 of earnings on which no CPP contributions are paid, will remain at the current level. Retirement pensions will be calculated on the five year average of the year's maximum pensionable earnings at the time of retirement instead of the three year average. The administration of disability benefits is being improved to ensure that benefits go only to those who are eligible under the legislation.
Retirement pensions for disability beneficiaries will be based on maximum pensionable earnings at the time of disablement and then indexed to age 65 by prices instead of wages.
New rules will be used to calculate combined pensions for people receiving both disability and survivor benefits, or retirement and survivor benefits. The death benefit will provide 6 months of retirement pension to a maximum of $2,500.
A stronger labour force attachment text will be required to obtain disability coverage-contributions will be required in 4 out of the last 6 years prior to claiming benefits.
These proposed changes are moderate and balanced. They will slow the growth of escalating costs. However, Canadians told us to go easy on changes to benefits and we have.
Finally, Canadians told us to treat them like members of a pension plan. We are going to do that. Public accountability will be strengthened. Canadians will receive annual reports on their CPP accounts as soon as possible and federal-provincial reviews will be required every three years rather than every five years.
With the exception of a small additional increase in the contribution rate for 1997, these proposed changes will come into effect in 1998 once legislation is passed.
The changes to secure the CPP are supported by the federal government and the provinces of Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, Quebec, Ontario, Manitoba and Alberta and the Northwest Territories.
We regret that we were unable to get unanimous support, and that two provinces felt they were unable to join the agreement. However, the requirement to achieve the support of two-thirds of the provinces with two-thirds of the population has been met.
It is fair to say that all the options to secure the CPP had a fair hearing. Some were introduced, however, after the public consultations were over. The door is open to those ideas, along with several important issues that were beyond the scope of this review.
Let me emphasize, our first goal was to assure the fundamental security of the Canada pension plan and we have done that. This is something with which governments have failed to come to grips for over a decade.
We are now in a position to begin discussing other issues and we will do so as soon as possible. They include adding mandatory credit splitting during marriage, reviewing survivor benefits to make sure that they reflect changing realities in today's families, looking at the work to retirement transition, including the possibility of providing partial CPP pensions during that period. We will look at British Columbia's proposal to expand CPP coverage up the income scale.
Canada's retirement income system is not alone in facing challenges from an aging population and increasing longevity. However, almost no other industrialized country in the world has done as much as Canada has to come to grips with these problems.
The government promised to make the retirement income system secure for Canadians. We are well on the way to doing it.
The CPP is one of the three pillars of our retirement income system. Old age security and the guaranteed income supplement also provide public pensions for seniors. We have taken action to make these programs secure and sustainable as well.
The new seniors benefit announced in the 1996 budget will consolidate the OAS and the GIS into one benefit, beginning in the year 2001. This new benefit is designed to help those most in need and will protect low and modest income Canadians.
The third pillar is tax assisted savings for retirement such as registered pension plans or registered retirement savings plans. We will continue to provide generous incentives for Canadians to save for their own retirement years.
In summary, all three pillars of Canada's retirement income system are being placed on a secure and a sustainable footing. Canadians can rest assured that the pension system, as they know it, can be counted on by them and by generations to come.
I would like to thank my colleague for his work on this file.