Mr. Speaker, I am particularly pleased to speak to the enhancement of the Canada pension plan because, once again, the government is providing the middle class with a concrete solution to help it get ahead.
It is important to recognize that retirement levels have dropped in Canada in recent decades. In 1977, 43% of Canadians had a defined benefit pension plan. In 2012, only 27% of Canadians, or just over one-quarter, had this same type of pension plan.
If we look only at the private sector, that number drops to 11%, or just over one in 10 people. There is also another reality that we have to face: too few young Canadians are saving for their retirement, for all sorts of reasons. One in four families approaching retirement age, or 1.1 million families, might not be saving enough money to maintain their current lifestyle when they retire.
What is even more worrisome is the number of families without a workplace pension plan. One-third may not save enough for retirement.
The government cannot let Canadians live with such uncertainty. That is why we are taking action in concert with the provinces and territories. We must collectively ensure that all Canadians can retire with dignity.
Therefore, the issue is what the government, the provinces, and the territories have decided to do. We started with the fundamentals. We increased the amount of the pension benefit. When the new CPP goes into effect, the amount at retirement will represent one-third of pensionable earnings. At present, it represents one-quarter.
Take, for example, a mother who earns $50,000 a year. When she retires, she will collect approximately $16,000 every year under the new plan, instead of $12,000. Then, the maximum level of pensionable earnings, that is the earnings used to calculate the final amount of the pension, will go up by 14% by 2025. This means that the maximum annual CPP benefit, which is currently $13,110, would go up to $20,000 in today's dollars. Under the enhanced CPP, the maximum benefit will go up by almost 50%.
Another interesting thing about the Canada pension plan is that it is funded entirely by workers' contributions. For most Canadians, the contribution rate will go up by just 1%. In addition, employee contributions to the enhanced portion of the CPP will be tax deductible, while other CPP contributions will remain eligible for a tax credit.
There is a mechanism to compensate low-income workers for CPP contributions. They may be eligible for an enhanced working income tax benefit. Their retirement income will be higher, but their family's budget will not be affected by higher contributions.
The new plan will be phased in over seven years from 2019 to 2025. The government is giving workers and businesses time to prepare for the changes. Canadian families know that they can count on us to safeguard their quality of life and their future responsibly.
I should point out that the enhancement complements other vehicles already available to Canadians that enable them to pay less tax: registered pension plans or RPPs; registered retirement savings plans or RRSPs; pooled registered pension plans; and tax-free savings accounts.
I want to emphasize that the changes we are proposing today are not about ensuring the long-term survival of the Canada pension plan. According to the Chief Actuary of Canada, the plan is already safe for the next 75 years. The purpose of these changes is to encourage Canadians, especially young people and future generations of Canadians, to save more for retirement.
In closing, I want to summarize the main advantages of the enhanced CPP.
Once the enhanced CPP is fully implemented, the maximum benefit will have increased by nearly 50%.
The CPP provides secure and predictable benefits, which means that Canadians can worry less about exhausting their savings or having their savings affected by the vagaries of the market.
CPP benefits are fully indexed to the cost of living, which reduces the risk of inflation gradually eroding the purchasing power of retirement savings.
The enhanced CPP is adapted to the job market, because it helps close the gap resulting from the lower coverage offered by employer pension plans. In addition, it is portable, so to speak, and follows workers from one province to another, which promotes labour force mobility.
The CPP has millions of contributors, which is a crucial factor, because it makes it possible for the Canada Pension Plan Investment Board to take advantage of economies of scale in order to generate healthy returns.
Future generations of Canadians can rest assured. They can be assured that, when they retire, the Canada pension plan will still have enough money to pay benefits. This means that they can focus on what matters to them, such as spending time with their families or enjoying their pastimes. Above all else, there is one thing that illustrates the enhancements of the CPP: Canada is at its best when all the governments work together. Today, members have a historic opportunity to raise the bar for future generations of Canadians when they retire. That is why we must support this bill.