Strengthened Canada Pension Plan Will Mean a More Secure Retirement and a Better Quality of Life for Middle Class Canadians
September 19, 2016 – Ottawa, Ontario – Department of Finance Canada
Helping Canadians achieve a safe, secure and dignified retirement is a central part of the Government of Canada’s plan to help the middle class and those working hard to join it. Middle class Canadians are working harder than ever, but many are worried that they won’t have enough put away for their retirement. One in four families nearing retirement—1.1 million families—risk not saving enough for retirement.
That’s why Canada’s governments have reached an historic agreement to strengthen the Canada Pension Plan (CPP), ensuring that future generations of Canadians can count on a more generous public pension system in their retirement years. Strengthening the CPP will not only provide retirement security for more Canadians, it will create jobs and have a positive, long-term impact on the Canadian economy.
The enhancement that Canada’s governments have agreed to does two things that will see Canadians receive more through the CPP in retirement.
First, it will increase the share of annual earnings that Canadians will get in retirement from one-quarter to one-third. This means an individual making $50,000 a year over their working life will receive about $16,000 per year in retirement instead of today’s $12,000. Second, it will also increase the point at which this new one-third replacement rate maxes out by 14 per cent, which is projected to be equal to $82,700 in 2025. This means that, if someone is making $80,000 a year over their working life, they will get a third of that per year in retirement from the CPP.
Finance Minister Bill Morneau appeared before the House of Commons Standing Committee on Finance today to provide additional information on the benefits of a stronger CPP and details on the agreement in principle signed by his provincial counterparts in June, including the Department of Finance Canada’s analysis on the benefits and positive long-term impact of a strengthened CPP.
“A stronger CPP is a core promise we made to middle class Canadians, and it’s one I’m proud to have worked with my provincial colleagues to deliver. The changes we’re making mean that Canadian retirees will have more money to spend on their needs, like healthy food, transportation and housing costs, which will lead to a more secure retirement, a better quality of life and create the conditions for overall economic growth in Canada.”
- Bill Morneau, Minister of Finance
- The Department of Finance Canada’s analysis confirms that, as a result of the CPP enhancement, gross domestic product is estimated to be between 0.05 to 0.09 per cent higher than under the status quo in the long term.
- The economic benefits flowing from this enhancement have the potential to create between 6,000 and 11,000 jobs for Canadians (based on 2015 levels of employment).
- Backgrounder on Long-Term Benefits of Canada Pension Plan Enhancements
- Fact Sheet: What the Agreement in Principle Means for Canadians
- Statement by the Minister of Finance on Historic Agreement to Strengthen the Canada Pension Plan
- Manitoba Agrees to Strengthen the Canada Pension Plan (CPP) and the Retirement Security of Canadians
- Joint Federal-Ontario Release
- Canada’s Finance Ministers Agree to Strengthen Canada Pension Plan
Office of the Minister of Finance
Department of Finance Canada