The federal government has introduced legislation to enhance the Canada Pension Plan days after British Columbia signed on to support the expansion.
Upon receiving royal assent, the legislation will raise the contribution rate for both employers and employees to 5.95 per cent from the current 4.95 per cent over a seven-year phase-in that will begin on Jan. 1, 2019.
Read: British Columbia signs on to support CPP expansion
“By supporting today’s legislation, Parliamentarians will boost how much each Canadian will get from their CPP pension in the future,” said Minister of Finance Bill Morneau in a release. “This will significantly reduce the share of families at risk of not saving enough for retirement and the degree of under-saving.”
The legislation will also increase the maximum income range covered by 14 per cent and include enhancements to disability and survivor benefits so they are proportional to higher contributions going forward.
Canada’s provincial governments agreed on June 20, 2016 to enhance the CPP. But, B.C. opted to launch a public consultation before providing its support earlier this week. Without the province, Canada wouldn’t have received the requisite two-thirds of provinces representing two-thirds of the population to proceed with the expansion.
Read: ‘Exciting time for retirement’ as CPP deal signals premium boost to 5.95%
“I would like to once again thank Canada’s governments for working together in pursuit of this achievement, and I am proud to have been part of these efforts,” said Morneau. “Together, we have proved that better is always possible when a renewed spirit of collaboration is put to work on behalf of all Canadians.”
Read: How can employers prepare for the CPP expansion?
Story updated at 12:30 p.m. to amend timeline for phase-in from five to seven years.