OTTAWA – The British Columbia government has given its blessing to enhancing the Canada Pension Plan, a critical vote of support that opens the door for Ottawa to gradually increase contributions and retirement benefits.
In a statement Tuesday, the B.C. government said it decided to back the proposal after considering feedback from stakeholders.
That was quickly followed by a declaration of victory from Prime Minister Justin Trudeau, who said now that all nine of the provinces taking part have agreed to the enhancement, legislation would be introduced in the House of Commons “shortly.”
Initially, every province except Quebec backed a tentative deal to expand CPP and they agreed to finalize it by July 15.
But B.C. was the lone signatory that declined to ratify the agreement-in-principle by the deadline, saying it needed more time to consult businesses and individuals.
“After hearing from thousands of British Columbians and Canadians, I’m confident the changes will have a meaningful impact on retirement income security at an affordable contribution rate,” B.C. Finance Minister Michael de Jong said in a statement.
B.C.’s support was crucial for the CPP’s expansion, which has been a central goal for federal Finance Minister Bill Morneau but which required the support of at least seven provinces representing no less than two-thirds of Canada’s population.
The CPP proposal has faced criticism from business owners, who would have to boost contributions for their workers, and political opponents.
Dan Kelly, president of the Canadian Federation of Independent Business, has said that some employers warn that CPP changes would likely force them to eliminate jobs.
Kelly has said the weakened economy makes it a risky time to lay extra costs on employers.
Interim Conservative leader Rona Ambrose has described CPP expansion as a “tax hike” that will cost families thousands of dollars.
Earlier this month, the federal government said it expected the changes to slow economic and employment growth slightly in the short term before boosting both in the long run.
Under the proposal, mandatory contributions will increase as a way to boost the program’s benefits for future generations of retirees.
CPP contributions by employees and employers would gradually increase over seven years starting in 2019. Once the changes are fully implemented in 2025, Canadians would pay between $9 and $42 more into the plan every two weeks.
The CPP changes would eventually provide future retirees with one-third of their average annual incomes, up from one-quarter. They would also increase the maximum amount of income subject to CPP by 14 per cent, to $82,700.
The reform would also provide a tax deduction — instead of a tax credit — on the increased contributions by employees. The federal government expects that adjustment to reduce government revenues by about $710 million by 2021-22.
The changes would also cost about $260 million a year from the public treasury to help offset the additional financial burden that expansion would eventually place on low-income earners. Ottawa would enhance its refundable working income tax benefit to help compensate eligible low-wage earners for the higher pension contributions.
The Finance Department has estimated that 1.1 million families — or about a quarter of Canadian families — are not saving enough for retirement.
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