Mr. Speaker, before I start my speech, I would like to again thank the member for raising a very important issue. I would also like to remind members on both sides of the House that we take issues regarding seniors very seriously. That is why we acted in the first budget of this government.
What I will do now is walk the member through the policy issues behind it and the unintended consequences that following his logic would have for seniors. Let me explain.
I rise today in the House to explain in detail how the Government of Canada is trying once again to boost Canada's economy, spur sustainable economic growth, and strengthen Canada's middle class.
In the last fall economic statement, the government presented additional measures to Canadians to ensure progress for the middle class and build on the momentum generated by budget 2016. Bill C-301, this private member's bill introduced by an opposition member today, does not support long-term income security for Canadians.
This bill amends the Income Tax Act to eliminate the minimum withdrawal requirements that apply to registered retirement income funds, or RRIFs, and makes a related amendment to the Income Tax Conventions Interpretation Act. This legislation therefore undermines our current objectives in terms of retirement income, which is the point of the retirement savings tax deferrals that are offered.
The purpose of tax deferrals on cumulated savings in registered retirement savings plans, RRSPs, and in RIFFS, is essentially to help Canadians earn replacement income at retirement. By imposing a cutoff for contributions to these plans and requiring that some of the savings be withdrawn and included in annual income once an individual has reached a certain age, the tax rules ensure that the savings are used for their intended purpose, in other words, to provide retirement income.
Compulsory minimum withdrawal rates were lowered in 2015 for individuals aged 71 to 94 in order to fall in line with recently observed historical long-term real return rates and projected inflation. These new withdrawal rates, which are considerably lower than the previous withdrawal rates, allow seniors to reduce the sums they withdraw from their RIFF and thereby keep more money in it, money that will continue to cumulate with a tax deferral, in order to meet their future retirement income needs.
Eliminating mandatory minimum RRIF withdrawals will enable high-income seniors and others who do not need the savings accumulated in their RRIFs for retirement income to postpone paying tax on the full amount of those savings until they are much older, possibly even until death, in which case the assets become part of their estate. In other words, they would not be forced to withdraw a portion of the savings in their RRIF and could defer taxes for virtually all of their retirement.
This situation is simply not compatible with the basic purpose of retirement income from tax-deferred retirement savings held in RRSPs and RRIFs. If gradual withdrawal of assets in a RRIF were not mandatory, it would be possible for some account holders to accumulate huge amounts of money in those accounts by the time they die. Consequently, large sums of money held in a RRIF would have to be included in income for the year of death. This could motivate survivors to press for tax exemptions for a portion of the deceased's RRIF assets, which would be contrary to the basic principles of our fiscal policy.
This bill would also create a major intergenerational disparity because younger seniors would not be obligated to withdraw a portion of the savings in their RRIFs every year while older seniors were forced to do so beginning at 71.
The Government of Canada took an important step to enhance seniors' income security in budget 2016, its very first budget.
Middle-class Canadians are working harder than ever. However, many of them are worried that they have not saved enough for their retirement.
In fact, one in four families approaching retirement age, or 1.1 million families, might not be saving enough. For that reason, the Government of Canada promised to help Canadians reach their goal of a secure and dignified retirement, and has worked with the provinces and territories to enhance the Canada pension plan.
I will outline how Canadians will benefit from the enhancements to the Canada pension plan. Once fully implemented, these enhancements will result in an increase of up to 50% in retirement benefits. The CPP provides secure and predictable benefits, which means that Canadians will not be as concerned about exhausting their savings in their lifetime or having their savings affected by turmoil in financial markets.
Canada pension plan benefits are fully indexed to inflation, which reduces the risk of price hikes gradually eroding the purchasing power of retirement savings. The CPP is also in line with Canada's changing job market. It helps to close the gap resulting from the lower coverage offered by employer pension plans and is transferable from one job and one province to another, which promotes labour force mobility. I know that my colleagues in the House will support a measure that promotes labour force mobility.
The CPP is also a large plan with millions of contributors, which makes it possible for the CPP Investment Board to take advantage of economies of scale in order to generate healthy net returns for all Canadians. Since CPP contributions are deducted automatically for all workers across the country, the CPP is an easy way to save.
This enhancement also enables us to put young Canadians facing a difficult job market on a more solid footing. This new measure is an important step that will help ensure a secure and dignified retirement for all Canadians, something that I am sure all parliamentarians want for Canada's seniors. Enhancing the Canada pension plan is an efficient and effective way to improve retirement income security for workers and their families.
Furthermore, enhancing the Canada pension plan is a responsible budgetary move on the government's part, unlike the private member's bill introduced here today. The 28th actuarial report on the CPP tabled by the chief actuary confirms that the level of proposed contributions and benefits under the enhanced CPP is sustainable in the long term. Canadian workers can therefore count on an even stronger and more stable pension plan for many years to come.
With its fall economic statement, the Government of Canada is maintaining the momentum generated by budget 2016. It is taking action to keep the promises made to Canadians, thus laying the foundations of a better Canada for today and for future generations.
In closing, I would like to once again thank my colleague on behalf of all parliamentarians for bringing this subject before the House this evening. I think that he will understand the goal of the public policy that we are proposing, which is to ensure tax equity among generations and ensure that Canadians can retire with dignity.
I have travelled all over the country, from Moncton to Yellowknife, to talk to thousands of Canadians, and I can assure members that what we have done in budget 2016 and our proposal to enhance the Canada pension plan are exactly what Canadians expect from a responsible government, a government that puts their interests first.