Third reading of Bill C-26, An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act
Honourable senators, I rise to speak in favour of Bill C-26, on phase 2 of the Canada Pension Plan, as it’s called.
The sponsor of the bill, Senator Dean, indicated in his remarks that families without workplace pensions are particularly at risk of under-saving for retirement. He indicated that it is estimated that 33 per cent of such families may be at risk of under-saving.
When this matter was before us at the Social Affairs Committee, we had a number of representations from organizations — both pro and con, and those in between — with different concerns with respect to the legislation. One of them was the National Pensioners’ Federation, and they indicate in their research that two thirds of working Canadians are in fact at risk of under-saving. Perhaps the truth is somewhere in the middle there, but other studies have been done and other evidence has been put before the committee in the past.
For example, the HSBC Insurance Survey, released a few years ago, showed that only 17 per cent of Canadians aged 30 to 70 feel that they’re financially prepared to retire, and 83 per cent of them don’t know how much income to expect once they stop working.
These are fairly frightening statistics. Therefore, it is most welcome to see this effort by both the federal government and the provinces to rectify the matter — and also to be looking forward, not only in terms of the current generation. There will be some benefits for people in a few years when this measure comes into effect, but most of the benefits will be for the next generation. How often do you hear that most of us in political office — of course, except for the people in this chamber — don’t think enough about future generations and about the next election?
Here is a case where we are really investing in our future. I want to emphasize that that is exactly what it is: It’s an investment. It’s not a tax, as some people tried to set out. In fact, let me deal with that first.
There was criticism that this would be a payroll tax that would cause job losses. Ironically, this same argument was used in 1986, when contributions were double. And it didn’t happen. There wasn’t this kind of “the sky is falling,” where there were massive job losses, and no evidence has been submitted to suggest that will happen this particular time. Again, I think this is an investment, by both employees and employers, in the future of this country.
Some have suggested that there are other savings vehicles; there are RRSPs and TFSAs. Some thought these would perhaps be adequate to meet the needs. However, this is not the case. This may be true for people who are well off, for people in the upper- middle income brackets, but it’s not true for many of the more moderate and lower-middle income brackets.
Some will say we’ve got the benefit of the GIS and the combination of that with the OAS and CPP, which, when put into effect in the 1970s, brought a lot of people out of poverty. We went from about 30 per cent down to about 5 per cent, where it is today. There are still, by the way, some stresses for single people, and particularly single women, in terms of that poverty line. By and large, they have a better floor, but there are a lot of people in between the upper-middle income and the bracket that gets the GIS who are going to have a substantial drop in their standard of living if we don’t do something to add to the Canada Pension Plan.
That is the plan: to add to the Canada Pension Plan. This plan has been very successful in this country, it’s been well invested, and I think the second phase will further help Canadians.
Another criticism we heard is that employees will be paying thousands of dollars more. In today’s dollars, the absolute maximum additional contribution payable by employers is $1,100, and it’s not payable until the increases are fully phased in, in 2025. It’s a seven-year phase-in, starting in 2019, and that number is only in relation to people with earnings of about $82,700, which is the top end of what the contribution would be.
However, that’s not where the average incomes are. The average incomes are much lower, much closer to $50,000 or $55,000. The annual employer contribution in that case is $515, not $1,100, or you can translate it into $43 a month.
As for the job loss argument, why would the employer terminate an employee when we’re talking about $43 a month, not the high figures that some were talking about previously?
I will speak briefly to one other point, the question of the observation. The observation deals with what is called the “dropout rate.” It reads as follows:
The Canadian Pension Plan includes provisions which allow an individual to leave out the years they were unable to work due to disability or child-rearing when calculating the value of their government pension.
That is what is in effect with the current CPP.
This ensures that an individual’s government pension is not dragged down due to these years of little or no contributions.
The proposed expanded bill that we’re dealing with, Bill C-26, does not include that provision, and as such there is the potential that individuals who will be on temporary leave from the workforce, for the reasons stated above, will receive a lower pension than their peers.
We believe at committee that this is not a just matter and it needs to be corrected. Minister Morneau, who was before the committee, said that he would in fact be putting this on the table and discussing it with his provincial counterparts. After all, as I said, this is an agreement between the federal and provincial governments, so he has to go back and get their agreement to it, but he has indicated a willingness to do it.
So we say, in our observation, that the government should work with the provinces in order to ensure that the expanded CPP includes these provisions. This observation — not an amendment to the bill but an observation — gives support to the minister in his efforts to raise this matter with the provinces and to ensure it’s corrected.
With that observation and with the provisions of this bill, as I said that I think are beneficial to many people who are struggling to get enough money together for their retirement, this bill is worthy of our support.