CPP enhancements to increase total benefits by 44% by 2070: study

The upcoming enhancements to the Canada Pension Plan will increase Canadians’ total CPP benefits by about 44 per cent by 2070, according to a new report by the Canadian Institute of Actuaries and the Society of Actuaries.

The study, authored by Bonnie-Jeanne MacDonald, senior research fellow at Ryerson University’s National Institute on Ageing and resident scholar at Eckler Ltd., used a simulation model to examine how the CPP enhancements would affect the financial well-being of the country’s seniors.

Read: CPP changes do little to ensure appropriate income for future retirees

About 62 cents of every dollar of new CPP benefits earned by an employee will make their way into his or her pocket as a senior, the report noted. For employees with lower earnings, reduced guaranteed income supplement benefits and higher taxes will offset the enhanced CPP. Higher-earning workers will lose a similar proportion, due to lost old-age security benefits and higher taxes, the report found.

The study also determined that the CPP enhancements would make nine per cent of Canadians overly prepared for retirement, particularly those middle-income earners who have workplace pensions. Despite the enhancements, the study projected that nearly a quarter of Canadians are still not ready to sustain their living standards in retirement, a ratio that rises to more than a third among those without meaningful employer pension plan participation.

Read: How can employers prepare for the CPP expansion?

Nevertheless, the study suggested a more immediate concern is the retirement prospects of today’s older Canadians, who will see little benefit from the CPP enhancements. 

“There are clearly challenges ahead to ensure retirement financial security for Canadians,” the report stated.

“This study suggests that the CPP enhancements are a step in the right direction,” it added.

Read: Despite complexities, expanded CPP the right call