Madam Speaker, it is an absolute pleasure for me to be addressing the House on this issue of Bill C-26 on behalf of the residents of Davenport.
I love meeting with the residents of Davenport. I have, over the last few months and since I was elected, constantly met with them. The groups of people I most enjoy are seniors. They are not shy about letting me know what they are thinking, what they are worried about, whether for themselves or for their families. They always joke with me. They often say to me, “When is the Prime Minister of Canada going to give me a raise?” They talk to me about the increasing cost of prescription drugs. They talk to me about the increasing cost of everyday life. They also tell me that they are worried about their children. I also have spoken to many of the middle-class Canadians who work in my riding, and they tell me that their pension and saving for their pension is one of the things that most worry them.
That is where I am going to start, by just reminding us all of some of the facts.
We know that middle-class Canadians are working harder than ever and that many are worried that they will not have enough set aside for retirement. I have heard that time and again right across my riding, and I am sure that is a message that is heard right across this country in every riding. We know there has been extensive analysis conducted by our finance department and by provincial governments, and they have found that around one-quarter of families nearing retirement—some 1.1 million families—face a drop in their standard of living when they retire. This is absolutely something worrisome. We also know that, according to Statistics Canada, in 2014 only 37.9% of employees had a pension plan and that number was trending down.
We know from the Broadbent Institute, which put out a report earlier this year, that 47% of those aged between 55 and 64 have no accrued employer pension benefits, and the vast majority are retiring with inadequate savings for retirement. We also know from that same report that just 15% to 20% of middle-income Canadians retiring without an employer pension plan have saved anywhere near enough for their retirement. Therefore, we know that there is a huge worry. We see the statistics. We know that Canadians currently are not saving enough for their retirement, and we know that action needs to be taken.
There was a commitment from the Liberal Party in the last election that we were going to improve the Canada pension plan, and indeed that is what we are proposing. I am very proud that our Minister of Finance met with his provincial counterparts earlier this year, and in June came up with a way to enhance our Canada pension plan. I just want to say that it is not easy to be dealing with all the provinces. I note that the Ontario government had its own pension plan enhancement that it was planning to put into place. I know there were a number of other provinces that were further down the line in terms of what they wanted to do. I know this was a huge effort on the part of our Minister of Finance. It was a huge coming to the table by all parties, all finance ministers from all provinces right across the country. I just want to say that it was wonderful leadership and a wonderful show of co-operation right across this country to actually enhance the Canada pension plan and to really be thinking about the future of all Canadians in every province.
Next, I will take this opportunity to say what the enhancement of the Canada pension plan means and what changes are being proposed. I am going to be heavily using information from a wonderful CBC news article that I happened to be reading, because it makes it so easy to understand and I want to make sure I am explaining it in a way that makes it easy for people in my riding of Davenport and all Canadians to understand what we are proposing.
The first thing is that there would be an increase in premiums. The increase would be for both the worker and the employer. Under the proposed enhanced plan, the CPP would replace fully one-third of a person's pre-retirement income, up from the current 25% replacement rate, up to a maximum amount of earnings that would also rise quite a bit.
Currently, a worker and an employer contribute 4.9% of the worker's income to the plan. The proposed change would increase it by one percentage point. So, it would go up to 5.95%. It will be phased in over five years, beginning in 2019. By the time the higher premium is fully in place in 2024, a worker earning around $50,000 a year on average would pay roughly about $25 a month more in premiums, or almost $300 a year.
That is just an idea of what is going to happen to our premiums. There would also be a bit of an increase on the employer's side. We are working to try to better save for our future retirement.
What happens to benefits? How will Canadians benefit from this increase? What does this actually mean?
In plain terms, a middle-income Canadian entering the workforce and now earning around $50,000 a year would in the future receive a pension of around $16,000 a year in retirement, instead of what they would currently be receiving, which is around $12,000. That is according to Finance Canada.
I should note, though, that younger workers will be contributing at the higher rate for a longer period of time, the 5.95% I was talking about, but it is an investment in their future, as my colleagues have been saying, and they also stand to gain the most when they eventually reach retirement age.
I know that constituents in my riding of Davenport will be very sad that the current CPP enhancements will not be positively impacting them, but we do have a number of different programs we are putting into place that will benefit them moving forward.
There is one other thing I wanted to mention because I thought it was an interesting fact. There was some concern by a number of people that the increase in the CPP premiums would impact lower-income Canadians. As a result, the Minister of Finance and his provincial counterparts have agreed to an expansion of the existing refundable tax credit known as the working income tax benefit, to offset any higher premiums. The maximum payout for this program is currently $1,800 for a family earning less than $28,000 a year.
We want to make sure that we are protecting lower-income Canadians and so have been very thoughtful in trying to make sure that not only will this benefit future generations, including helping middle-class Canadians and youth to invest in their future and their retirements, but will also include protections for those on the lower end of the salary scale in Canada.
There has been a lot of concern about the impact on small business. I have a lot of those small businesses in my riding. I know they were very happy to hear that it would be implemented over five years. I think they appreciate that there would be enough time for them to plan, organize, and arrange for the future. So while I believe there will be an impact, I think overall it would be beneficial to our businesses, to our workers, to our economy overall, and to Canadians in general.
In conclusion, I encourage everyone in the House to vote in favour of supporting Bill C-26. It would benefit youth, it would benefit families, and it would ensure that future generations would be more secure in their retirement.