P.E.I. finance minister agrees to CPP changes
An agreement-in-principle to reform the Canadian Pension Plan between the provinces, territories and the federal finance minister is expected to cost Islanders and Canadians more — but also provide more benefits at retirement.
"This is definitely for our future generations," P.E.I. Finance Minister Allen Roach said Tuesday on CBC Radio's Mainstreet P.E.I.
Plan takes effect in 2019
The agreement, reached at a meeting in Vancouver on Monday, would have the average Canadian worker earning about $55,000 annually pay $7 more a month beginning in 2019.
By 2023, contributions will increase to $34 a month. Maximum annual benefits will increase to $17,478.
"[Canadians will] see an increase of about 14 per cent. So, right now, their pensions are funded at about 25 per cent. This will bring it up to about 33 per cent of their earnings," said Roach.
"When they retire, that will replace their earnings by about 33 per cent in a pension plan."
Concerns over increased costs to Canadians
The concern over the increased cost to Canadians was raised at Monday's meeting in Vancouver, Roach said.
"That's why we pushed the plan out over time. The plan won't start until 2019. And it'll be implemented and gradually phased in over seven years," Roach explained.
"So, that's a good way, I think, to allow people … to get ready to prepare for it."
Moderate, modest and very secure
The seven years to phase in the plan will also help businesses adjust to changes to their contributions. Low-income contributors will have tax deductions to reduce the impact on their contributions.
We haven't seen anything like that in a very, very long time.- P.E.I. Finance Minister Allen Roach
Roach described the plan as an enhancement to the CPP that is "moderate," "modest" and "very secure."
"We haven't seen anything like that in a very, very long time," he said.
Quebec and Manitoba didn't agree to the CPP changes, but are "taking a second look" at the agreement.
Roach added that the matter will now have to be discussed by the P.E.I.'s cabinet ministers and receive order-in-council approval before it goes back to the federal government.
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With files from Mainstreet