Mr. Speaker, I want to thank my colleagues for allowing me this opportunity to speak. Quite frankly, since taking office about 12 years ago, I would have to say that this is close to the top, if not at the very top, when it comes to issues brought to my constituency offices. I have two in riding in Newfoundland and Labrador, one in Gander and the other in Grand Falls-Windsor. Formerly I had one in Bonavista, which was part of my old riding. Without a doubt, seniors' poverty is one of the greatest issues I have ever seen. Every year calls come in about how much the increase will be this particular year, how the formula works, what is going to be on their GIS, and how it affects their ability to receive the provincial drug card in order to receive medications, because medication is one of the largest expenses of any senior no matter where they are, as members know.
We engage in this debate and we talk about how we hope to bring seniors to a higher level of income security. To do that, we have talked to the provinces, because in shared jurisdiction we do this. On June 20 of this year, we were able to arrive at a compromise for the entire nation, which allows us to increase that level of support for our seniors. There are three main ways in which Canadians can save through tax measures and the like. One would be through CPP, which we are debating here today. We also have several tools available for tax deductions—for example, tax breaks when it comes to buying a home—and also through RRSPs, or RPPs, we are able to use tax incentives when we voluntarily put money into those. The third would be other tools that we use to save for retirement including home equity, business equity, and the like.
Now we look to what we are dealing with here today, and we are talking about the Canada pension plan and how the contributions will rise, as many people have said in the House. We acknowledge that, but think about the benefits that will ensue because of all this. In many cases, the numbers have been put through the machine, as it were, and it shows that when it comes to retirement, the ideal goal for any senior retiring is that they are able to replace their pre-retirement income at a rate of about 60%. This does not alleviate that for all seniors in this case, but it certainly goes a long way to alleviate the hardships suffered by many.
I mentioned all the calls I get in my office, and this is a big part of it. Many of them have to do with old age security and the guaranteed income supplement that also flows from that. We can save that for another day and another piece of legislation, but in the meantime what excites me about this is that now, over the seven-year period ahead, we would see an increase that I think is substantial for the average Canadian, the average impoverished Canadian, someone making less than $30,000 per year, even less than $20,000 when we take in the other aspects of this legislation. I will get to that in a moment.
Also in this case, it would affect a whole host of young people who are currently not thinking about retirement, and many of them are not at this stage in the game. Many millennials are not thinking about retirement, but they would know now that they would face an enhanced benefit once they retire, after we have the seven-year phase-in. I mentioned the phase-in of the first five years would look at the income replacements, the contribution rate, and it is substantial in the sense that, instead of now one-quarter of income replacement, it would raise it to one-third of income replacement. That is a substantial investment for all of us; for employers, employees, and for the government.
The upper earnings limit on the back end of that seven years, in the final two years, 2023-2025, would increase by about 14% and that too is substantial, especially when it comes to the middle class. That would put the rate up to about $83,000 at that stage, and that is substantial considering that now it is in the lower $50,000 range.
In essence, in the last 10 years prices have gone up substantially in many sectors. I think of the many sectors in Newfoundland and Labrador where seniors find the hardest struggle, such as energy prices, medications as I spoke about earlier. Travel expenses in rural areas are also a substantial expense. Many seniors live in their homes and the energy bills many of them face are incredible. With a small lowering of energy prices over the past little while, it is still a substantial part of their day-to-day lives. Many of them are forced to abandon their homes, not because they are unable to look after themselves but because they cannot afford it anymore.
Many of these people do not have workplace pensions on which to rely. Many people between the ages of 60 and 65 will have workplace pensions that they have accrued through defined benefit programs, which go a long way toward replacing income, certainly even above the 60% level. However, in this case, let me consider my family.
My father worked over 40 years in one mill. Through the good work of his union, he was able to attain a defined benefit package, which meant he received the government old age security at 65. However, he was able to supplement that with a fairly large and generous defined benefit package from the company he worked for at the time. It was Abitibi-Consolidated, a mill in central Newfoundland. It no longer exists unfortunately. Through the work of his union, the International Brotherhood of Electrical Workers, the employees were able to negotiate a generous pension package.
Let us take a look at the workforce today. Not a lot of young people are able to work in one place for more than 40 years. That pool is very small. What is so important here is that means they do not get the benefit from having a defined benefit package because they have moved around from place to place and job to job. In other words, my father's pension package was generous only because he was there for 40 years. If he moved around from job to job, he would not have had that, simply because that pension was not portable. Portability is going to be a major issue over the next 20 or 30 years.
What is key is the fact that the CPP is 100% portable no matter where we go in Canada. That is why we have to increase the benefit for those who need it to get even close to fulfilling their dream of replacing their pre-retirement income of 60%. We hope to get closer to that goal over this seven year period. Yes, contributions will rise for employees and employers, and we have all accepted that. Certainly I have. However, when it comes to the benefits we are talking about here, we are trying to put this in line for those who need it at the time they retire.
Going back to my example, a lot of people will be moving around from job to job and they may have private savings that are portable, such as a myriad of RSSPs, or RPPs or things of that nature, including RRIFs for that matter. However, a lot of people do not and this is a way for us to keep that base level of income for Canadians when they retire, not at 67 but at 65.
I look forward to this going to committee, and looking at amendments as it goes forward. I want to congratulate the provinces in this. They have come a long way in helping us create what we think will help alleviate poverty for seniors. Again, it is the number one issue in my riding and I am not alone in that. There are many people, especially rural ridings, for whom the price they have to pay on just basic goods has become quite crippling.