Mr. Speaker, I will be sharing my time with my colleague from Newmarket—Aurora.
The average age in my riding, Laurentides—Labelle, is among the highest in the country. According to the 2011 census, the average age was 49.5. It will surely be more than 50 according to the 2016 census. In some communities, homes are listed at less than $40,000 and are not even selling at that price. Young people are leaving the region in droves and seniors are only staying in retirement. We have many challenges and we welcome many changes for seniors. As a government and as a party, we like to plan for the long term and not just for tomorrow.
Therefore, I am very pleased 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. There are several reasons for that.
This bill is the promise of a better future. It also reflects the government's commitment to help Canadians achieve their dream of a more secure retirement. This is a long-term project. It is a project for the future and for young people who are currently preparing to enter the labour force. This next generation will also be assured of a dignified retirement. We are acting for a future that goes beyond any election cycle to help those who will come after us.
We are building on what was accomplished by the decision-makers of the 1960s who created the Canada pension plan, enhanced old age security by creating the guaranteed income supplement, and implemented measures that, in the long-term, would significantly reduce poverty among seniors. What is more, we are here in a true spirit of federalism because the agreement to enhance the Canada pension plan or CPP comes from a real spirit of co-operation with the provinces, who approved the approach.
Is the enhancement of the CPP necessary? Absolutely. It is essential, and I will explain why.
Middle-class Canadians work hard, but they still do not feel as though they are making any progress. One in four families who are approaching the age of retirement may not be able to save enough money to maintain their current lifestyle when they retire. That represents 1.1 million families. We had to take action.
We also have to accept the fact that fewer and fewer companies are offering defined benefit pension plans and that fewer Canadians have such a plan. It is a major challenge for Canadian families and it is time we dealt with this.
The agreement we reached with the provinces will increase the retirement income of Canadians who are in this difficult situation, and also promote economic growth and create jobs.
How will the CPP expansion work? There are two key things to keep in mind.
First, the CPP currently replaces a quarter of Canadians’ average annual earnings. The new CPP will replace a third. Future retirees will therefore have more money in their pockets. Take Mila for example. She is a mother who has earned on average $50,000 a year during her working life. Under the current plan, she will get $12,000 when she retires. Under the new plan, Mila could get a little more than $16,000.
Second, the maximum level of pensionable earnings will go up 14% by 2025. That means the maximum annual CPP benefit, which is currently $13,110, would go up to $20,000 in today's dollars. Under the enhanced CPP, the maximum benefit will go up by almost 50%. It is clear that these changes to the CPP will make life better for retired Canadian workers and will help them achieve their goal of a strong, secure, and stable retirement.
How much will this cost? For most Canadians, the contribution rate will rise by just 1%. Take Kevin, for example, who earns about $55,000. His contributions will increase by $6 per month in 2019. Once the progressive implementation is complete in 2025, Kevin's contribution will have gone up by about $43 per month. That minor increase will be largely offset by his higher retirement income. With the enhancement, Kevin will collect approximately $17,500 per year in today's dollars in CPP benefits, which is about $4,400 more than under the current plan.
I should also mention that contributions to the enhanced portion of the CPP for wage earners like Kevin will be tax deductible and that a tax credit will continue to apply to employees' current CPP contributions.
We can therefore proudly say that Canadians will have more money in retirement thanks to the new CPP. Furthermore, the budgets of low-income workers will not be affected, because the working income tax benefit will also be increased to offset the premium increases.
I would like to add that our government has decided to give everyone time to prepare for the new provisions. The changes will be implemented gradually over seven years, from 2019 to 2025. This is the responsible way to go, to make sure that businesses and workers have time to adapt.
We are taking into account the problems that exist at the provincial and national levels. We have engaged with each province to discuss their particular situation, and we will continue to do so. We took steps to ensure that we could implement these measures in a way that will not hurt businesses, because we want the owners of businesses of all sizes to be assured that the government will implement these changes to CPP without harming the functioning of the Canadian economy.
As I said in my introduction, the government is creating a better future for Canadians, especially the middle class. This will have a much broader impact on all Canadians, because it is important to have a long-term vision. Higher CPP benefits will lead to greater domestic demand, which will stimulate the Canadian economy. Since savings will grow, more money will be available for investment, also thanks to the new CPP.
As a result, we expect the gross domestic product to increase by 0.05% to 0.09%, which represents approximately 6,000 to 11,000 new jobs. Quite simply, an enhanced CPP means more savings and a better retirement.
Middle-class Canadians will then be able to focus on what matters most, such as spending quality time with their family and friends, rather than worrying about not being able to make ends meet. It is important that we plan for the future.