Reforms coming to Canada’s Pension Plan
Federal and Provincial Finance Ministers agreed on Monday, June 21, to support an expansion of the country’s Pension Plan. The agreement would increase premiums moderately over a seven-year phase period – starting on January 1, 2019, and allow a higher benefit for pensioners.
The current plan in place sets a contribution of 4.95% of income up to $54,900 cap, for both employers and employees. The maximum payout is $13,110, but the average annual CPP benefit is $7,974.84, which is lower than other developed countries.
The CPP reform proposes to raise the income cap to $82,700 by 2025, with the income replacement level increasing to one-third of the cap.
Benefits for low-income Canadians
There are discussions as to whether or not the new CPP would work in favour of lower-income Canadians. The plan is proposing to increase the Working Income Tax Benefit, which helps low-income earners. However, a high CPP payout could impact the Guaranteed Income Supplement, a benefit that aims to assist seniors with low income.