Source: Department of Finance Canada
The Government’s plan for a strong and growing middle class includes helping Canadians achieve their goal of a safer, secure and dignified retirement.
Minister of Finance Bill Morneau marked the final step in implementing an improved Canada Pension Plan (CPP) today by announcing that the Governor General has signed the Order in Council to bring the CPP enhancements in Bill C-26 into force, meaning all necessary legislative requirements have been met by Canada’s governments to implement the agreed-upon enhancements. Minister Morneau was joined by Mississauga Mayor Bonnie Crombie, former Mississauga Mayor Hazel McCallion, and Mississauga Centre MP Omar Alghabra at the event.
The strengthened CPP will provide more money to Canadians when they retire, so that they can worry less about their savings and focus more on enjoying time with their families.
As joint stewards of the CPP, the Government of Canada and Canada’s provincial governments worked cooperatively towards reaching an historic agreement on June 20, 2016 in Vancouver to strengthen the CPP and meaningfully reduce the risk of not saving enough for retirement.
“Today, we mark the final step in delivering an enhanced CPP that will give workers today and future generations a safer, more secure and dignified retirement. I would like to thank Canada’s Finance Ministers for their hard work in reaching an historic agreement to make the CPP even better. Their commitment to improving the lives of Canadians in retirement is an example of what we can accomplish together—and of federalism at its best. This CPP enhancement will not only mean more money for Canadians when they retire, it will also mean a stronger economy and more middle class jobs over the long term.”
– Bill Morneau, Minister of Finance
- The CPP enhancement that is now fully legislated and in force will increase the maximum CPP retirement benefit by about 50 per cent. The current maximum benefit is $13,370. In today’s dollar terms, the enhanced CPP represents an increase of nearly $7,000, to a maximum benefit of about $20,000. Increased CPP contributions will be slowly phased in over a seven-year period beginning in 2019, and it will take roughly 40 years of contributions for a worker to fully accumulate the enhanced benefit.
- The enhancement does two things to make this happen for contributors:
- First, it will increase the share of annual earnings received during retirement from one-quarter to one-third. This means that an individual making $50,000 a year in today’s dollars over their working life will receive about $16,000 per year in retirement instead of roughly $12,000 today.
- Second, it will increase by 14 per cent the maximum income range covered by the CPP, so that those who earn more will receive more in retirement.
- The CPP is a central support in Canada’s overall retirement income system, currently providing $37.3 billion in benefits to 5.2 million Canadians.
- The federal legislation to implement the agreement reached by Canada’s Ministers of Finance (Bill C-26) received Royal Assent on December 15, 2016.
- The changes to the CPP in Bill C-26 required formal consent from at least seven provinces representing at least two-thirds of the population. Provincial consent was obtained, through the issuing of provincial Orders in Council, from all nine signatory provinces.
- Once provincial consent was obtained, CPP legislation also required that a federal Order in Council fix the date on which the CPP changes come into force.