Mr. Speaker, first and foremost, I want to thank the Government of Canada for taking on this initiative of expanding the CPP. It is no small task to get the provinces, which represent two-thirds of the Canadian population, to sign on to CPP enhancements. These provincial governments represent all parties, the Liberal Party, the NDP, and the Conservative Party, so the expansion of the Canada pension plan is very much a Canadian solution that is not only important but very much needed.
We know that, today, one in four families, or 1.1 million people, nearing retirement risk not saving enough for retirement. In particular, middle-class families without workplace pension plans are at a greater risk of under-saving for retirement, and a third of those families are at risk.
To address this, this historic agreement was reached with the provinces in June to make meaningful changes to the CPP. These enhancements would be phased in over a seven-year-period, starting in 2019. Once fully in place, the CPP enhancement would increase the maximum retirement benefit by about 50%. Enhanced benefits would accumulate gradually as individuals pay into the enhanced CPP, and to fund these enhanced benefits, annual CPP contributions would increase modestly over seven years, starting in 2019.
I would like to remind the House that our 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 the average rate among the 25 countries in the OECD that have such public pension plans. This remains true even with our CPP enhancement.
What would this mean to Canadians, at the end of the day?
Young workers in their twenties or workers nearing retirement would all benefit from the enhanced CPP. For the young workers in their early twenties just starting out in their career, this would be a great benefit when they retire. By paying their portion of the CPP contributions, which are then matched by their employers, they would be building toward a safe, secure retirement for their own future.
The modest increases in contributions would be phased in over seven years. Someone working with constant earnings of $50,000 would contribute an additional $70 per year, or $6 a month, in 2019. By the end of the phase-in period, that same person would be contributing $475 per year, or $40 per month. By strengthening the Canada pension plan, workers would receive more money from their pension, an increase from one-quarter of the eligible earnings to one-third. For example, people who make $50,000 a year for their working life would receive about $16,000 each year in retirement instead of today's $12,000. That is $4,000 more a year in their pockets.
In addition, the enhancement would increase the point at which a person stops making contributions by about 14% in 2025.
I know that some people are concerned about the increased contributions and what they would mean to their bottom line: their paycheque. We thought about this and designed a gradual phase-in, so that contributions would increase modestly over the seven-year implementation period. We also thought about employers, in designing this enhanced CPP. We specifically designed a slow phase-in process with the express purpose of minimizing the impact and giving employees and employers time to adjust to these changes.
The great news is that our young workers would receive the largest increase in their retirement benefits. In fact, we know that young people, in general, find it difficult to save. Many are working in jobs that do not have company pension plans, which makes them have to save for their retirement on their own.
The other fact is that a tax deduction, instead of a tax credit, would be provided to the employee contribution portion of the enhanced CPP. This would avoid the new CPP contributions increasing the cost of saving.
Workers in the middle of their career or nearing retirement would still benefit from an enhanced CPP as the increased contributions that are made in 2019 and later would go toward an enhanced retirement pension.
What about the low-income worker worried about the effect of increased CPP contributions on his paycheque? How will the enhanced CPP help him or her? I want to assure my colleagues and low-income workers all across this country that an enhanced CPP will benefit all workers, including those with low incomes.
To make sure that eligible low-income workers are not financially burdened as a result of the extra contributions, the government will also enhance the working income tax benefit. The proposed enhancement to the working income tax benefit is designed to provide additional benefits to roughly offset the incremental CPP contributions for eligible low-income workers.
With this enhancement, there will be no impact on disposable income. When he or she retires, they will also get a larger retirement benefit payment. The bottom line is that people who are working in Canada, paying into the CPP, and planning to retire after 2019 will have more money in their pocket from their CPP retirement pension benefit.
In my riding of Brampton East, day in and day out, I speak to constituents who call me personally about the issues they or their families are facing. I often hear that young Canadians have a hard time finding permanent, stable employment with reliable pension plan. That is often way out of reach. I hear from young families and established families alike who are thinking of retirement and realizing they do not have adequate savings. This concerns me, and it should concern every member of the House.
The Canadian Association of Retired Persons estimates there are roughly 600,000 seniors living in poverty in Canada. That is more than the population of Brampton. Frankly, that is unacceptable.
Our government is doing its part to ensure that in the future no seniors live in poverty. We started by reducing the age of eligibility for old age security back to 65, and boosting the GIS by 10% to provide almost $1,000 per year per GIS recipient, aimed especially at helping low-income seniors who live alone.
However, that is not enough. Associations like CARP have been calling for an expansion of the CPP for years, and it is about time we delivered. We feel this is a win-win. I urge my hon. colleagues to support an enhanced CPP that will further help Canadians contribute to a safe and secure retirement.