Mr. Speaker, I would like to share my time with my colleague from Mississauga East—Cooksville.
I am delighted to be here for this very important, and I would call it historic, debate. The changes our government is proposing to enhance the Canada pension plan are important to every working Canadian and would have a lasting impact for generations to come.
Not only are the changes important, they are needed. We know that today one in four families nearing retirement, that is 1.1 million families, risk not saving enough for retirement. This is even higher for middle-class families. A third of middle-class families without workplace pension plans are at a risk of not saving enough for retirement. It is estimated that the proposed enhancement debated today, once fully in place, would reduce the share of families at risk of not having adequate retirement savings from 24% to 18%. This is close to 300,000 Canadians who would be lifted out of post-retirement income insecurity.
For families at risk, it is estimated that the average gap between retirement income and income required to replace 60% of working income will decrease by more than half, declining from $8,300 to $3,700, which represents a substantial increase in income security for the remaining 18% of retirees.
This enhancement will be gradually implemented over seven years, beginning in 2019. Retirement benefits, which will gradually increase as people contribute to the enhanced CPP, will be funded by a slight increase in annual contributions over seven years. The slight and progressive increase in CPP contributions will minimize the impact on employers and employees and give them time to adjust.
I want to remind the House that contribution rates in Canada are much lower than those in other countries with public pension plans. In fact, the CPP contribution rate is about half of the average rate among 25 countries in the Organisation for Economic Co-operation and Development, or OECD, that have similar public pension plans.
Even with the CPP enhancement, this rate would be just over half the average OECD rate. Accordingly, a person who earns $50,000 a year would contribute approximately $70 more per year, or $6 per month, in 2019. By the end of the phase-in period, those same people would be contributing $475 per year, or $40 extra per month to benefit from the enhanced CPP.
By strengthening the Canada pension plan, workers would receive more money from their retirement pension. The amount would increase from one-quarter of their eligible earnings to one-third. This means a person making $50,000 a year over a 40-year career would receive $16,000 each year in retirement instead of the current $12,000. That is $4,000 more each year right in the pockets of workers.
A more modest earner, one averaging about $35,000 a year, would receive almost $3,000 more a year above the $8,500 currently provided by today's CPP.
In addition, the enhancement would increase the point at which a person would stop making contributions by about 14% in 2025. This increase in eligible earnings would further increase the retirement benefits that all of these Canadians would receive.
This enhancement will give more Canadians access to a public pension plan. It will also give low-income workers more incentive to work because they will receive higher benefits. Low-income workers will benefit in the short term because they will have more disposable income, and in the long term because they will have a better retirement. A total of 6,000 low-income workers will be lifted out of poverty in the short term.
Additional great news is that our younger workers would see the largest increase in their retirement benefits. Younger Canadians often find it difficult to save in safe, reliable, and efficient ways. Many are working in jobs that do not have a company pension.
Workers in the middle of their careers or nearing retirement would also benefit from enhanced CPP as the increased contributions made in 2019 and beyond would go toward an enhanced retirement pension.
However, the Canadians who will benefit the most from this enhancement are those who do not currently have access to a private pension plan. The advantages of public plans are considerable because they effectively protect against financial and longevity risks, they are transferable between businesses and provinces, and they are administered at a low cost to businesses and workers.
The enhancement of the CPP is therefore an inclusive policy that is good for the middle class for several very important reasons. This enhancement offers all Canadians the opportunity to benefit more fully from a public plan. It increases low-income Canadians' incentive to work. It reduces poverty among low-income workers, and it improves the income security of our seniors.
We believe that all Canadian workers will benefit from this enhancement, particularly the middle-class and those working hard to join it.
I invite my colleagues to enthusiastically support this historic opportunity to enhance the Canada pension plan, a measure for our country and all Canadians.