Honourable senators, I rise to speak on Bill C-26, an Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act.

Before I do that, I ask for your indulgence in taking a few minutes to reflect on my arrival in the Senate.

It has been a long road from my first serious job as an apprenticed machine tool fitter or millwright at the Dunlop Tire Company in Birmingham in the former industrial West Midlands of the United Kingdom.

Like many other newcomers to Canada, it was, as Bob Dylan would say, "a simple twist of fate" in 1978 that brought me to Hamilton, Ontario, to earn a master's degree in sociology at McMaster University. I came for 12 months, met my spouse, Marie Boutilier, and 38 years later I find myself among you in this venerable place.

Honourable senators, none of us makes these journeys alone, and that is certainly true of me. I am nothing but a beneficiary of the tremendous opportunities provided to me in my time in this wonderful country. From the moment I arrived as a graduate student and later as a union researcher, a labour relations professional, a new public servant in Ontario's Ministry of Labour, and later as a Deputy Minister of Labour, I was encouraged, nudged, thrown into the deep end of many ponds, and stretched personally and professionally in ways that I never would have imagined. Come to think about it, I'm in another one of those deep pools standing here right now.

I've benefited from a wonderful public service career, culminating as the head of Ontario's 63,000-strong public service and, beyond that, the opportunity to teach top-rated public policy graduate students at the University of Toronto's School of Public Policy & Governance.

I make two short points about public service. First, as a professional, non-partisan public servant, I have supported Conservative, Liberal and New Democratic premiers and governments in Ontario, and I have seen first-hand the hard work that they all do, politicians of every stripe on behalf of citizens. No one works harder and none are larger magnets for accountability when things go wrong than our elected politicians.

Second, I've also seen the hard-working commitment every day of Canada's public servants at every level of government. These are second to none, and they work hard every day to make a difference in the lives of Canadians. There is always room for improvement in our public services and with our public servants, but there is also much to be admired, and I ask that we don't forget that.

I often say that public servants hold an important public trust in their hands, and they take this very seriously, as do senators and the wonderful officials and staff who support us in this place. I've learned that very, very quickly.

Millions of Canadians sleep well every night because they don't worry too much about the availability of public services, and they don't worry about our system of governance. It occurs to me that they sleep well because they believe that someone else is worrying about these things and is working hard at these things. That most definitely involves our public servants, elected politicians and us in this chamber.

Honourable senators, I've been drawn here — and I arrive here drawn like you — to the virtues of working collaboratively to achieve the best possible outcomes for Canadians. I'm deeply committed to working with you in this important enterprise. I'm happy to be here. Thank you, and now back to business.

Honourable senators, on June 20, Canada's federal and provincial governments came to an agreement that will enhance the Canada Pension Plan to give Canadians a more generous public pension and help them to retire with greater security and predictability. Because their efforts are reflected in the text of Bill C-26, we have the opportunity to support Canadian federalism at its best, and the power of what we can accomplish when governments work openly and constructively together to advance the highest priorities of the people that they represent.

A financially secure and dignified retirement is an important and fair objective for Canadians after a lifetime of hard work.

The facts tell an entirely different story, however. One in four families is nearing retirement age and an estimated 1.1 million families might not have saved enough for retirement. Several factors come into play.

We've seen the ongoing decline in private workplace pension coverage. There was a time, honourable senators, when private retirement pensions were a robust part of Canada's post- retirement income. But we've already seen the share of private sector employees covered by pension plans drop from over 35 per cent in 1977 to less than 25 per cent in 2012.

Today those families without workplace pensions are at particular risk of under saving for retirement. It's estimated that 33 per cent of such families may be at risk of undersaving. What's more, even those with access to private retirement plans are facing challenges.

This is in part because the reliability of those private pension plans offered by employers today has diminished as a result of the ongoing shift away from solid and predictable defined benefit pension plans in favour of defined contribution models. In 1975, 33 per cent of private sector workers were covered by defined benefit pension plans. By 2012, this coverage had dramatically reduced to 11 per cent.

Defined contribution plans expose individuals to investment risk, so if the investments they hold diminish in value, they get less in retirement. This can result in unexpected shortfalls in their pension savings just prior to their planned retirement, forcing them to work longer than desired or planned.

Younger Canadians are particularly exposed to market risks, such as interest and asset price movements, as they have both higher debts and higher assets than previous generations had at the same age, and they rely more on individual savings for retirement.

What's more, younger generations of Canadians can expect to live longer and healthier lives. While this is obviously a positive trend, their longer life expectancies also mean that the level of savings they will require at retirement must be higher in order to maintain comparable living standards over a longer retirement.

Fortunately, there is an existing retirement savings program in place that has the capacity to address all of these challenges, both effectively and economically. Stronger retirement savings are possible through a stronger Canada Pension Plan. The Canada Pension Plan, or CPP, has provided a solid foundation for supporting stronger retirement savings and alleviating poverty among seniors over the 50 years since its inception.

Statistics Canada data shows a dramatic decrease in the poverty rate among Canadian seniors over the past four decades, from 30 per cent in 1976 to about 5 per cent in 2014. According to a study by the Conference Board of Canada, this decrease is largely attributable to the establishment of the CPP and in Quebec the Quebec Pension Plan.

The most recent available statistics indicate that 5.2 million people in Canada receive $37.3 billion in benefits from the CPP, and the fundamental strengths which have supported its performance also make it ideal for addressing the challenges of the future.

The CPP provides a secure, predictable benefit, which means that Canadians can worry less about outliving their savings, having their retirement's investments impacted by large negative market shocks or the security of their savings through their workplace pension plan.

CPP benefits are also fully indexed to prices, which reduces the risk that inflation will erode the purchasing power of retirement savings.

The CPP is also a good fit for Canada's dramatically changing job market. It helps to fill the gap left by declining workplace pension coverage, and it is portable across jobs and provinces, which promotes labour mobility.

The CPP is also an efficient way to save. It's a large program with millions of contributors, which allows the CPP investment board to take advantage of economies of scale in order to deliver strong net returns. And with the automatic collection of contributions for all workers, the CPP is a simple and efficient way to save.

The CPP is an appropriate tool to improve the retirement income of younger workers. It will take roughly 40 years of contributions for a worker to fully accumulate an enhanced CPP benefit. This means younger Canadians will be the greatest beneficiaries of a CPP enhancement.

Honourable senators, I think this gives us pause to reflect on what Canada's federal and provincial governments have been able to accomplish here. In a world of 30-second sound bites, where the next election cycle qualifies as long-term thinking, they have accomplished something commendable and increasingly rare: they have planned ahead for the future. This is intergenerational policy-making. In doing so, they have displayed the same wisdom and foresight our predecessors did in creating the critical programs that sustain and define us as a nation.

Over 75 per cent of Canadians support a stronger CPP. They understand that an enhanced CPP is a way that we can take action today to support stronger retirement incomes.

Honourable senators, the legislation we're considering will do several things to provide future generations of Canadians with a more generous public pension in their retirement years. It is a comprehensive package that will increase CPP retirement, disability and survivor benefits while striking an appropriate balance between short-term economic considerations and longer- term gains.

First, it will increase the share of annual earnings received during retirement from one quarter to one third. This means that an individual making $50,000 a year in today's dollars over their working life will receive about $16,000 per year in retirement instead of roughly $12,000 available today.

Second, it will increase by 14 per cent the maximum income range covered by the CPP so that those who earn more will receive more in retirement. Once fully in place, the CPP enhancement will increase the maximum CPP retirement benefit by about 50 per cent. The current maximum benefit is $13,110. In today's dollar terms, the enhanced CPP represents an increase of nearly $7,000 to a maximum benefit of nearly $20,000.

These increased CPP retirement benefits will increase demand and increase savings overall. This will boost economic output and make more money available for investment. The Department of Finance estimates that, as a result, gross domestic product would see a slight increase between 0.05 and 0.09 per cent as a result of the CPP enhancement contained in Bill C-26. Employment levels are also projected to be permanently higher.

By providing more money from the CPP to Canadians when they retire, it will meaningfully reduce the share of families at risk of not saving enough for retirement. The Department of Finance has estimated that by ensuring the Royal Assent of Bill C-26 as it currently stands, we have the opportunity to reduce by about one quarter the share of families at risk of not having adequate retirement savings.

A stronger CPP is also an important tool to improve the retirement income security of younger workers. It's an opportunity for today's working Canadians to give their children, their grandchildren and future generations a more secure retirement.

The legislation also includes enrichments to CPP, disability and survivor benefits. For most Canadians, all of these increased CPP benefits will come from only a 1 per cent increase in contribution rates.

In considering this modest rate increase, it is important to note that the legislation governing the CPP requires any enhancement to CPP benefits to be fully funded. In essence, this means that individuals will receive higher benefits, paid for by increased contributions. This requirement was put in place during the reform of the CPP in the 1990s to ensure that the CPP remains financially sustainable.

This will ensure that the enhancement follows the principle of intergenerational equity, meaning that each generation pays for its own benefits. Each year of contributing to the enhanced CPP will allow workers to accrue partial additional benefits. Full enhanced CPP benefits will be available after about 40 years of making contributions, but partial benefits will be available sooner and will be based on years of contributions.

This legislation and the agreement it enacts will give individuals and their employers ample time to adjust to this modest increase by implementing it gradually starting in 2019. For example, an individual with earnings of $54,900 will contribute about $6 more a month in 2019. By the end of the seven-year phase-in period, contributions for that individual would be about $43 more per month. Because new employee CPP contributions will be tax deductible as opposed to being eligible for a tax credit, Canadians will not experience an increase in tax if registered retirement savings plans, RRSPs or employee pension plan contributions, which are deductible, are reduced in response to the increase in CPP contributions.

The proposed legislation, as agreed upon with the provinces, will also ensure that low-income Canadians are not financially burdened as a result of these additional contributions. It will do that by enhancing the Working Income Tax Benefit to roughly offset incremental CPP contributions, leaving eligible low-income Canadians with little to no change in disposable income, while still securing higher retirement income.

Taken together, these tax measures will provide Canadians with about $970 million in federal fiscal support in 2021 to 2022 alone.

Honourable senators, all of these positive outcomes reflect the careful approach that informed finance ministers' work towards an agreement on CPP enhancement, and it's also apparent in the way Bill C-26 supports all CPP contributors equally.

The benefits from both the base CPP and the CPP enhancement contained in Bill C-26 will always be higher for all contributing Canadians, regardless of where they live and what they do. Bill C- 26 does not affect the existing provisions in the base CPP that are particularly important in supporting women and disabled Canadians. The child rearing provision — the CRP — and the disability exclusion in the base CPP will continue to exclude or to drop out qualifying periods of low earnings from the calculations used to determine base CPP benefits in retirement, effectively increasing the retirement pension of the recipient and protecting their eligibility for CPP.

For example, women will still be able to split pension credits with their former spouse or partner in the case of divorce or separation. CPP survivor benefits will also continue to support women. In 2015, 85 per cent of CPP survivors were women, and the plan will continue to provide this support and further increase the benefits that women receive.

The general dropout will continue to ensure that 17 per cent of the lowest earnings in an individual CPP contributory period can be dropped out of the calculation used to determine CPP benefits in retirement. These measures will continue to effectively boost individual CPP benefits in retirement.

The enhanced CPP contained in Bill C-26 simply builds on these existing CPP core benefits, and it does so in a prudent way that reflects the extensive research that Canada's finance ministers brought to the table in crafting this enhancement to maximize benefits for Canadians. The challenge that government faced in crafting an enhanced CPP was that the existing CPP was not accumulating benefits fast enough to meet the future needs of Canadians in a world of challenges, declining workplace pension coverage, low interest rates and market volatility. Their solution is effective because it focuses available resources on addressing these challenges as efficiently as possible.

In order to effectively balance the need for increased benefits against the need for affordability, the CPP enhancement is structured differently from the core CPP that it builds on. Its design reflects a policy focus on increasing income replacement, especially in retirement. In short, it is designed to translate the largest possible portion of new CPP savings into the largest possible new retirement benefits. So, in this regard, the enhanced CPP model contained in C-26 closely resembles the structure of the workplace-based registered pension plans that are currently in decline.

In conclusion, years of discussion between the provincial and federal governments and all of their myriad of stakeholders are reflected in Bill C-26. Through briefings from the Department of Finance, I am assured that the views of workers, employers, financial planners, academics, actuaries, economists and other governments were all judiciously considered and distilled down through these 11 governments to the document that we have before us today.

As joint stewards of the CPP, only those governments have the authority to change the agreement contained in the bill. Now that all nine CPP-participating provinces have fully confirmed their support for implementing the Vancouver agreement, we have the opportunity to join them in making history by supporting the passage of this legislation through the Senate to reflect the consensus that has been achieved.