Retirement savings in this country has been a hot topic of late, and yesterday evening in Vancouver the federal government and (most of) the provinces announced that they have reached a deal to expand the Canada Pension Plan. The deal must be approved by July 15 of this year.
The proposed changes will roll out over seven years, beginning in 2019, and mean both a bigger benefit to retirees and bigger monthly contributions by employers and employees.
Under the current CPP, employers and employees each contribute 4.95% of income between $3,500 and $54,900. The proposed plan would see that annual pensionable income increase up to $82,700 by 2025. For example, contributions for a typical worker earning about $55,000 would initially increase by $7 a month in 2019, eventually increasing to $34 a month in 2025. Employers would match those contributions.
The current CPP replaces 25% of earnings up to $54,900, with a maximum CPP benefit of $13,110. The average annual payment is $7,974.84. The expanded CPP would aim to replace one third of income up to the new $82,700 ceiling. The maximum annual payout would increase by about one third to $17,478.
CPP reform requires the approval of the federal government and seven of the provinces containing two thirds of Canada's population. All of the provinces except Manitoba and Quebec have signed on to the agreement announced yesterday. Quebec Finance Minister Carlos Leitao said he supported the agreement but that Quebec would be proposing an alternate version of the expansion in Quebec.
What about the ORPP?
Ontario's Finance Minister, Charles Sousa, has announced that this new deal will signal the end of his government's proposed Ontario Retirement Pension Plan.
What does this mean for you?
These changes raise many important issues for unionized and non-union employers across Canada. We will be providing further insights as things develop and more details become available.
For more information, visit our Employment and Labour blog at www.employmentandlabour.com
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