The Honourable Bill Morneau, Minister of Finance, released the following statement at the conclusion of yesterday’s meeting of federal, provincial and territorial Finance Ministers, where an agreement in principle was reached that will strengthen the Canada Pension Plan for future generations of Canadians:
“Helping Canadians achieve their goal of a safe, secure and dignified retirement is a key part of the Government of Canada’s plan to help the middle class and those working hard to join it. As part of this plan, we committed to working with all provinces and territories to enhance the Canada Pension Plan (CPP) to ensure that future generations of Canadians can count on a strong public pension system in their retirement years. Today, I am very pleased to announce that Canada’s Finance Ministers have come together to reach an agreement in principle that brings us one step closer to achieving this goal on behalf of Canadians.
Canada’s Finance Ministers have agreed in principle to work on a CPP enhancement starting January 1, 2019 that would:
- increase income replacement from one quarter to one third of pensionable earnings—this means that, at maturity, a Canadian with $50,000 in constant earnings throughout their working life would receive a yearly pension benefit of around $16,000 instead of the $12,000 they would currently receive, or $4,000 more per year; and
- increase the maximum amount of income subject to CPP by 14%, which is projected to be equal to roughly $82,700 in 2025.
To ensure that these changes are affordable for businesses and Canadians, we are taking three measures:
- introducing a long and gradual phase-in starting on January 1, 2019 that will allow more time for businesses to adjust;
- enhancing the federal Working Income Tax Benefit as a means of offsetting the impact of increased contributions on low-income workers; and
- providing a tax deduction—instead of a tax credit—for employee contributions associated with the enhanced portion of CPP in order to avoid increasing the after-tax cost of saving for Canadians.
The outcome of this meeting shows that Canada works best when its governments come together in the interest of the people we serve. The agreement in principle includes British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador, with Quebec and Manitoba agreeing to remain part of the discussions moving forward. I want to thank my provincial and territorial colleagues for their important contributions to the future of the CPP and to the retirement security of current and future generations. I believe the diversity of views around the table, the close collaboration and the passion that I witnessed since these discussions began last December have led us to an agreement in principle that is in the best interest of all Canadians. In particular, I want to salute the leadership that the Province of Ontario has shown on this important issue.
I would also like to extend special thanks to the Government and people of British Columbia for hosting us in their beautiful province. I look forward to our next meeting, and continuing to build a renewed relationship with the provinces and territories based on openness, mutual respect and collaboration that will make real headway on issues that matter to Canadians.”