Mr. Speaker, I am pleased to rise today in the House to speak on behalf of the New Democrats and express our support at second reading for this important piece of legislation. Bill C-26 amends the Canada Pension Plan act, among other acts, to incorporate the recent agreements reached with the provinces to enhance the Canada pension plan benefits for all Canadians.
While we believe that better was possible and will continue to urge the government to make a more improved plan available for workers in this country, and despite the fact the full effect of these changes will not be felt for 49 years, this CPP enhancement is in theory an important first step in improving retirement security for young Canadians. We congratulate everyone, particularly labour, which worked so hard to lay the groundwork for this agreement.
New Democrats have fought for decades for increases in the Canada pension plan, old age security, and the guaranteed income supplement benefits for all seniors. In fact, the idea of having universal retirement security programs for all Canadians has been a core New Democrat policy going back to the formation of our party. We have urged every government for decades to make meaningful improvements for Canadians, so that every Canadian can retire in security and in dignity.
Our support for the bill is qualified. That is because while the enhanced expanded CPP proposed by the bill is a plan that will benefit a new generation of workers entering the workforce, it does almost nothing to alleviate the retirement income crisis of those approaching retirement now and, quite frankly, in the decade or two ahead. We must now see immediate action by the government to help those seniors and Canadians who are on the cusp of retirement and who will not benefit from these changes. Government must build on the momentum of this agreement and take the next steps to improve long-term retirement security for today's workers, including addressing the valid concerns raised by Quebec about the impacts on low-income workers.
In the New Democrats' view, much more needs to be done to help our seniors live with the dignity they deserve. The high cost of housing and prescription medication, the clawback of the GIS, and the indexing of pensions are just a few immediate issues that we think require more work by the government. We also think that the government needs to keep its promise to introduce a new seniors price index to make sure that old age security and the guaranteed income supplement keep up with rising costs.
Retirement insecurity in this country is reaching a crisis level, as many Canadians do not have adequate savings to maintain their lifestyle upon retirement. A large part of this problem is fuelled by the erosion of workplace pension plans to the point that six in 10, or 60% of, working Canadians have no workplace pension.
In the New Democrats' view we need a clear breakdown from the government as to who will benefit the most from this plan and who will benefit the least, and how these changes will interact with other programs, and how we can strengthen the workplace pension regime in this country, as well as the public component that the bill addresses.
By way of background, it is helpful to review what is being proposed by the bill. Currently the CPP covers earnings up to a cap of $54,900. For earnings up to the cap, the CPP is designed to replace about 25% of the income. The maximum pension that a worker who fulfills all the criteria, working for 40 years and contributing the maximum amount, can look forward to is about $1,092 per month or $13,100 per year.
Contributions are 4.95% for the employer and the employee, up to the same cap. The expanded CPP proposed by the bill is a separate new tier. The new tier is added on top of the existing one. The new CPP tier does two things phased in over the next nine years to 2025. First, it takes the replacement rate up to 33 1/3% from the current 25% of earnings, and, second, it expands the upper earnings cap from today's $54,900 up to $82,700.
The net result is that when this plan is fully phased in by 2065, a worker who earns $54,900 annually in 2016 dollars would receive a maximum annual pension of about $18,117 in 2016 dollars by the time he or she retires. For a worker at the $82,700 maximum tier amount income level, CPP benefits would rise to a maximum of $20,352 a year in today's dollars.
The reason I am using today's dollars is that it is important to understand the very limited expansion that the current government has brought forward. If people can imagine that in 2065 they would be at the maximum CPP pension if they contributed for 40 years at the maximum earnings level, with a resulting pension of $20,352 a year, just about every Canadian planning for retirement would see that that is absolutely insufficient to retire with.
We all, though, acknowledge that the Canada pension plan was never designed to be a full retirement plan—although there is a credible argument to be made that a government pension plan could in fact achieve that if it were wanted—but was intended to be supplemented by private savings and workplace pensions. This is why I raised earlier the very alarming statistic that more than half of Canadians have no workplace pension. This is very different from the 1960s and 1970s when a much higher percentage of Canadians had a plan at work.
Canadians who are working today cannot expect to have very much pension income from their employment. Of course, given the rising costs of living in this country, particularly in Vancouver where I come from, it is very difficult for them save the amount of money they will need to supplement their Canada pension plan. So what the New Democrats would like to see and what we have advocated for a long time is a Canada pension plan designed in a way that the worker and the employer would contribute sufficient money to replace 50% of the money a person would need upon retirement. In concert with that, we also propose strengthening the programs, policies, and laws in this country to encourage employers to create pension plans in the workplace to help those workers supplement their pensions. We also believe, for instance, that laws that protect pension funds upon bankruptcy also need to be strengthened so that workers, as we saw in the case of Stelco, would not see their deferred salaries—the money they have saved over the years—distributed among creditors upon bankruptcy. That is a long-standing problem in this country that neither Conservative nor Liberal governments have ever had the political courage to touch, but it is a matter of fundamental justice.
The Canada pension plan is the best pension plan in this country for a number of reasons. It is portable. It does not matter if people quit or leave a job in New Brunswick and move to British Columbia and start working again, because their Canada pension plan will still be activated. It is the cheapest pension plan in the country. There is an associated cost for employers, who normally have to provide a pension plan, as they have to hire pension lawyers and actuaries and custodians of the money, whereas in this case, all of the costs of the plan are borne by the government. Being the largest plan in the country, it is also the safest repository of Canadians' income. In sum, it is the cheapest, most portable, safest pension plan in this country.
I think Canadians from coast to coast would love to see the current government increase Canada pension plan contributions to such a degree that we could phase these in slowly and affordably over time so that the plan would actually do what it is intended to do, which is to make sure it replaces 50% of workers' income upon retirement so that more Canadians can retire in dignity.
I just want to conclude by saying that I often hear the Conservatives use language calling this a payroll tax. Retirement investment is not a tax. It is an investment. There is no secret to pensions. People put away a bit of money for a long period of time. That is savings, and that is how they fund their retirement. When workers and employers both contribute to that pension plan, that is how we get a dignified retirement for Canadians in this country, and it is about time that the Conservatives recognized this and joined the 21st century so that Canadians can retire in dignity and with some level of security.