Mr. Speaker, returning to the matter at hand, when we are talking about the Canada pension plan, what does the agreement in principle mean for Canadians? As my hon. colleagues may not like to understand but is true now that so many provinces have agreed, once fully in place, the CPP enhancement would increase the maximum CPP retirement benefit by about 50%. The current maximum benefit is $13,110 and in today's dollar terms the enhanced CPP would represent an increase of nearly $7,000 to a maximum benefit of nearly $20,000.
What do my hon. colleagues across the way have against making sure that Canadians have a more secure retirement? Enhanced benefits would accumulate gradually as individuals pay into the enhanced CPP, and young Canadians just entering the workforce would see the largest increase in benefits.
To fund these enhanced benefits, annual CPP contributions would increase modestly over seven years starting in 2019. For example, an individual with earnings of $54,900 would contribute about an extra $6 a month in 2019. By the end of the seven-year phase-in period, contributions for that individual would be about an additional $43 per month. This would make the CPP more relevant and more effective and would ensure that we are lifting millions of Canadians out of precarious financial positions and out of poverty.
To ensure that eligible low-income workers are not financially burdened as a result of the extra contributions, the Government of Canada would enhance the working income tax benefit, an existing benefit that is designed to help keep people in the workforce and encourage others to join it. One of the advantages of this CPP agreement is that it would significantly reduce the share of families at risk of not saving enough for retirement and the degree of under-saving that is prevalent in Canadian society.
The Canada pension plan will always be there for Canadians. It helps to fill the gap for those who do not have a workplace pension plan, and it is portable across jobs and provinces.
It is important also to make a comment on survivor benefits, which are monthly benefits that are provided to the surviving spouse or common law partner of a deceased contributor and a monthly benefit to their dependent children. It is also important to mention the death benefit, a one-time lump sum benefit usually paid to the estate of the deceased.
I must congratulate my colleagues in the government benches and their colleagues in the provinces, as stewards of the CPP. These changes are important for the future of Canada and for Canadians.
It is also important to share with the House why it is important for us to take these bold moves to enhance the CPP. Some 1.1 million families approaching retirement are not saving enough. My mother recently turned 65, and she is fortunate enough to have saved enough with my father over time, and the CPP adds to that income. However, we know from Statistics Canada data that 1.1 million families approaching retirement are not saving enough, and that will put them in a precarious financial position.
It is important for us to respond so that the CPP will not simply drift into irrelevance over time. Middle-class Canadians, as we know, are working harder than ever, and many are worried that they will not have set aside enough money for their retirement. Young Canadians in particular are facing the unique challenge of securing adequate retirement savings at a time when fewer can expect to work in jobs that historically would have paid pensions over time. The question remains as to how to close that gap, though, and that is what the Minister of Finance and colleagues in government and provincial colleagues have come to agree to with this agreement.
The Department of Finance has examined whether families near retirement are adequately preparing for retirement. Based on household income and wealth data from the 2012 survey of financial security, families are considered to be at risk of under-saving if their projected after-tax income at retirement does not replace 60% of their pre-retirement after-tax family income.
Some 1.1 million Canadians are approaching retirement without having saved enough for a secure retirement.
I must congratulate the Minister of Finance, his parliamentary secretary, and his provincial counterparts for having made predictions and examined demographic and statistical data in an effort to ensure that retired Canadians can retire with dignity.
Middle-class families without workplace pensions are at greater risk of under-saving for retirement, and I know what this is like. I grew up in a middle-class family in Morinville, Alberta. When my dad had his first heart attack at 39, I was 16, and we felt immediately the effects of that kind of hardship on a family. If that happens later in life and people do not have enough money to save, the CPP, in many cases, is a life and family saver.
It is estimated that 33% of families nearing retirement age who have no workplace pension plan assets may be at risk of under-saving for retirement, compared to 17% of families who have workplace pension benefits. Overall, families in the lowest income group were found to have the lowest risk of under-saving, as OAS and CPP benefits provide relatively high income replacement at this income range. At the same time, lower-income families are likely to require a higher level of income replacement than other income groups to maintain their pre-retirement living standard.
This is the kind of foresight and the kind of planning that Canadians elected us to provide. The Minister of Finance and his colleagues, the ministers of finance of the provincial and territorial governments, also understood that this was a critical time for Canadians.
We are living longer and healthier lives. Longer life expectancies increase the level of savings required at retirement to maintain comparable living standards. At some time in our past, at 46 years old, I would be considered already an old man, but I feel very young. Statistics say that I will live well into my 80s if I maintain a healthy lifestyle and understand the consequences of other behaviours. I want to be able to live a long life, and Canadians are living longer lives, and so we have to make sure that our social programs, like the Canada pension plan, provide for this longer life expectancy.
Overall participation in private sector RPPs has declined since the 1970s, and there has been an ongoing shift in defined benefit contributions. These trends of declining workplace pension plans mean that Canadians on the verge of retiring have fewer options to plan as they live into their 80s and 90s, and we know historically that more Canadians are living to 100 than ever before.
Economic conditions since the 2008-09 recession pose a particular risk that young Canadians may be moving from job to job and may not have the kind of safety net that other Canadians in past generations enjoyed. This agreement in principle to enhance the CPP is smart public policy. The income replacement level would be increased to one-third of eligible earnings, and there would be a gradual seven-year phase-in beginning on January 1. We would increase the working income tax benefit, and tax deductibility has also been factored in.
This is why Canadians voted for real change. This is the kind of work that, within the first year of our mandate, we can all be proud of, because we have ensured dignity and retirement savings for millions of Canadians. I am proud to represent the residents of Edmonton Centre and to stick up for this kind of smart public policy.