Mr. Speaker, I am very pleased to stand today to speak to Bill C-26, which aims to amend the Canada Pension Plan, the CPP Investment Board Act, and the Income Tax Act.
When I was campaigning last year, and in fact in many meetings and conversations I have had since then, I heard over and over again that people are worried about their financial future and specifically about whether they are saving enough to retire with security and dignity. That is why I am pleased to share my reasons for supporting Bill C-26, which aims to address those concerns in a responsible and meaningful way by expanding the CPP.
Earlier this year, Canada’s provincial finance ministers met with my colleague, the federal Minister of Finance, and agreed that more must be done to ensure all Canadians are able to retire with dignity. They recognized that an expansion of the CPP plays a major role in achieving this. It was a textbook example of the kind of consensus we can achieve when everyone comes to the table as partners in pursuit of better service to Canadians.
Many people in my riding of Whitby, and right across the country, are working harder and longer than ever. According to a 2012 study, almost two-thirds of Canadians are working more than 45 hours per week. That is a 50% increase from more than 20 years ago.
On top of that, advancements in technology mean that workers are on call 24/7. Even with all these extra hours and hard work, many are concerned that they will not have enough money for retirement.
Far too many Canadians are facing significant drops in their quality of living upon retirement. In fact, 1.1 million Canadian families are approaching retirement having not saved enough. That is why we have recognized the need to do more for workers, and we are taking action.
The Canada pension plan has been a source of financial security for Canadians for more than half a century. It provides Canadians with a predictable benefit, year after year. Unlike private investments or pension plans it is not subject to market volatility. It is also one of the more efficient ways for Canadians to save as its massive contribution base allows the CPP investment board to deliver strong net returns.
Despite all the benefits provided by the CPP, there has been a recognition in recent years that it is not doing enough to support Canadians in their retirement. Our government has heard these concerns and is moving to address them. Bill C-26 will significantly boost how much each Canadian will receive from the Canadian pension plan. Under the current system, retirees receive one-quarter of their earnings; after this much needed expansion, that will increase to one-third, up to a maximum annual benefit of nearly $20,000.
As a former small business owner, I know that the CPP plays an important role in ensuring that employees can save for their retirement. Employees work very hard for companies. It is very important to me that they be able to retire with dignity.
It was a priority of our government to move forward with the expansion in a responsible way, which is why we are phasing it in over several years. Starting in 2019, annual CPP contributions will begin to increase modestly over seven years. As an example, a worker earning just over $50,000 will contribute an additional $6 per month in 2019, and by 2025 that worker earning the same amount will be contributing about $40 per month.
The expansion of the CPP will benefit all workers; however, it is very important that workers on the lower end of the income spectrum are not unfairly burdened. Our government understands that while lower income workers want to save more for their retirement, they face tight budgets that will make the increased contributions difficult for them. This is why Bill C-26 also proposes to increase the working income tax benefit to offset increases in CPP contributions. The working income tax benefit will be increased to roughly match the level of CPP contributions. This will allow lower income workers to increase their retirement saving without creating unfair burdens on their tight budgets.
I also want to speak about how this legislation would benefit the next generation of workers. Young Canadians face a much different employment landscape than their parents or grandparents did, many of whom worked in the same job for the same company for decades and have access to private pension plans as part of their compensation, providing them with financial security upon retirement.
That is no longer the norm. It is now common for workers to change jobs, or even fields, a number of times throughout their careers, which can have significant effects on their pension contributions and payout.
Even more troubling is the overall decrease in companies providing registered pension plans to their employees. In those organizations offering pension benefits to their employees, we are seeing a significant shift away from defined benefit plans to defined contribution plans, which often provide less financial certainty upon retirement.
When we combine all of these factors with rising life expectancy, it is becoming more likely that Canadians, in particular young Canadians, will outlive their savings. The expansion of the CPP would mitigate that risk. In fact, young Canadians who are entering the workforce over the next few years will benefit the most from this change to the CPP. As such, this expansion is a tangible investment in the future security of our children and grandchildren.
While recognizing that this expansion would do the most for our younger workers who are just beginning to make investments in their CPP, we must acknowledge that too many current retirees are facing significant challenges in making ends meet. This is why our government is also taking steps to improve the quality of life for seniors today. In budget 2016, our government confirmed that it was boosting the guaranteed income supplement top-up to benefit single seniors with up to $947 annually. This will help lift low-income seniors out of poverty and improve the financial security of about 900,000 single seniors across Canada. This increase is directly targeted to assist those seniors who are most vulnerable.
In closing, I would like to thank my colleague, the Minister of Finance, and his provincial and territorial counterparts for their hard work on this important issue. This expansion is an important part of ensuring that all Canadians have a secure and dignified retirement. I am very proud to stand here and support Bill C-26.