Enhancement to Canada Pension Plan to be Funded by Gradual Premium Increases
The New Brunswick government says enhancements are coming to the Canada Pension Plan.
Finance Minister Cathy Rogers says the provincial government reached an agreement in principle with the federal government and other provincial governments this summer to "recommend a modest and balanced incremental enhancement to the plan."
Rogers says contribution increases will be phased in over a seven-year period from 2019 to 2025.
- Enhanced benefits will accumulate gradually as individuals pay into the plan. Young people entering the workforce will see the largest increase in benefits.
- By 2025, the plan will increase income replacement from one-quarter to one-third of pensionable earnings. This means that, at maturity, a person earning $50,000 per year throughout their working life would receive a yearly pension benefit of about $16,000 instead of the $12,000 they would currently receive.
- To fund these enhanced benefits, annual contributions will increase modestly over seven years starting in 2019. For example, a person with earnings of $54,900 will contribute about $6 more per month in 2019. By the end of the seven-year phase-in period, contributions for that person would be about $43 more per month.
Rogers says the agreement is meant to allow Canadians a more secure environment with a national pension plan. “Furthermore, because of lowering employment insurance premiums, and because it will be phased in over time, this will minimize the impact on individuals, businesses and the economy.”
Addressing concerns that eligible low-income workers not be financially burdened as a result of the extra contributions, the federal government says it will enhance the Working Income Tax Benefit, which is designed to help keep people in the workforce and encourage others to join it.
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