Honourable senators, it's a pleasure to rise and speak on Bill C-26 at third reading. I want to start by thanking the Standing Senate Committee on Social Affairs, Science and Technology for their analysis of the bill and for the opportunity to participate in their hearings.

I also want to acknowledge Senator Stewart Olsen's collegiality in her role as critic.

As you know, in June of this year in Vancouver, Canada's governments agreed to enhance the Canada Pension Plan to provide for greater retirement security for Canadians.

Honourable senators, achieving a secure and dignified retirement is among the most important goals of Canadians as they plan ahead for their future. The challenge is that we're not on track to seeing this achieved, and that's why we're talking about this this evening.

Extensive analysis conducted by Finance Canada found that around one quarter of families nearing retirement — that's 1.1 million families — are currently facing a drop in their standard of living when they retire. Middle-class families without workplace pension plans are at a particular risk of under-saving for retirement; in fact, one third of these families are at risk.

We also know that young Canadians in particular are facing the challenge of securing adequate retirement savings at a time when fewer can expect to work in jobs that will include a workplace pension plan. Further, many young people will move through a number of workplaces during their working lives. It's critical that retirement savings are portable and that they move with individual workers to adapt to changing norms.

Canada's finances ministers acknowledged these issues in working towards consensus on enhancements to the CPP. This is indeed the challenge that Bill C-26 is designed to address.

Taken together, Bill C-26 provides for a comprehensive package that will increase CPP benefits while striking an appropriate balance between short-term economic considerations and long-term gains.

Once fully in place, the CPP enhancement would increase the maximum CPP benefit by up to 50 per cent. The current maximum 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.

The gradual implementation of the enhancement, with a two- year notice period and a seven-year phase-in, greatly mitigates any negative impact on employment. It also gives struggling provinces adequate time to prepare for the gradual increases in contributions, alleviating financial strain for all Canadians.

In the short term, the impact on jobs is expected to be minor and wage growth is expected to remain positive. Over the long run, once businesses fully adjust to the enhancement and people begin to receive higher benefits, the impact on jobs is expected to become positive.

Bill C-26 would 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 today.

And 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.

The positive impact of these changes is significant. It will meaningfully reduce the share of families at risk of not saving enough for retirement as well as the degree of under-saving.

Finance Canada has estimated that by strengthening the CPP we would reduce the share of families at risk of not having adequate retirement savings by about one quarter when considering the income from three pillars of the retirement income system and savings from other financial and non-financial assets.

Honourable senators, a strong CPP is the right tool at the right time to improve the retirement income security of younger workers. It's an opportunity for today's hard-working Canadians to give their children, their grandchildren and future generations a more secure retirement.

The Department of Finance has concluded that retiring in comfort could be even more of a challenge for these future generations, in part because they're expected to live longer than previous generations. But also, if current trends continue, younger Canadians will be less likely than previous generations to work in jobs where retirement benefits are offered by their employers. And if the current low interest rate environment persists, their savings might also grow more slowly than previous generations.

For most Canadians, all of these increased CPP benefits will come from only a 1 per cent increase in contribution rates. For example, an individual with earnings of $50,000 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 $40 more per month.

I'd like to take a moment to address a concern that has been raised about the "drop-out" provision, which in the base CPP plan permits those taking time off to raise families or because of disability to drop out low or nil earnings when CPP benefits are being calculated.

There has been a fairly broad view that the drop-out provisions should also be considered for inclusion going forward in the proposed supplementary plan. We learned last week that the Minister of Finance has committed to raising this issue with the provincial finance ministers at their next meeting dealing with the CPP. As a result, I'm confident this issue will be addressed appropriately in order to ensure the CPP is inclusive for all Canadians.

In addition, in 2016 the Government of Canada has made significant new investments to support Canadians in their retirement years. This includes increasing the Guaranteed Income Supplement top-up benefit for single seniors by up to $947 annually to help lift low income single seniors out of poverty. This measure represents an investment of over $760 million per year and will improve the financial security of about 900,000 single seniors across Canada, most of whom are single women.

The government has also restored the eligibility age for OSA and GIS benefits to 65 from 67.

As a result of the increased retirement benefits flowing through the enhanced CPP, retirees would have more money to spend on things like healthy food, transportation, housing costs and other goods and services that enhance their quality of life.

Today's legislation, as agreed upon with the provinces, would also ensure that low-income Canadians are not financially burdened as a result of making additional contributions. It would do that by enhancing the Working Income Tax Benefit to roughly offset incremental employee CPP contributions, leaving eligible low-income Canadians with little to no change in disposal income while securing higher retirement income for them.

The enhanced CPP benefits in Bill C-26 will be available to all workers who participate in the plan from January 2019 onward.

Honourable senators, I'd like to address the issue that has been raised in some quarters that this measure is a "payroll tax." It clearly is not. The CPP is a savings program, and its enhancement will continue to build savings. Workers can expect to receive their contributions back in retirement with substantial interest. This is an investment in our collective future. Contributions will not and cannot be used for other objectives.

In fact, as set out in legislation, CPP contributions are held in a segregated account. Funds would be invested by the arm's-length Canada Pension Plan Investment Board, with the central goal of achieving a good return for contributors while minimizing risk.

Honourable senators, for 50 years the CPP has been helping to ensure that all workers in Canada have a minimum level of financial security in retirement. The most recent statistics tells us that 5.2 million people in Canada receive $37.3 billion in benefits from the CPP.

The Conference Board of Canada reports a dramatic 25 per cent decrease in the poverty rate among Canadian seniors over the past four decades, from 36.9 per cent in 1976 to 12.3 per cent in 2010, an achievement largely attributable to the establishment of the CPP and, in Quebec, the Quebec Pension Plan.

Bill C-26 would make amendments to the Canada Pension Plan Investment Board Act to make the CPPIB the manager of the improved CPP. Finance ministers will continue to review the performance of the CPP and the CPPIB every three years, supported in each case by a current actuarial evaluation from the Chief Actuary.

The CPP Investment Board is well regarded around the world for its impressive record of investment performance and management excellence. It operates at arm's length from government. It has a mandate to invest CPP funds in the best interests of plan members. It has been acclaimed by international bodies such as the World Bank as a model of an independent, transparent and accountable public pension fund management organization.

As the manager of a large fund program with millions of contributors, the CPP Investment Board is able to take advantage of economies of scale in order to deliver strong net returns. With this solid investment structure as its foundation, the CPP provides a safe, secure and predictable benefit, which means that Canadians can worry less about outliving their savings or having their savings impacted by significant market downturns. CPP benefits are also fully indexed to prices, which reduces the risk that inflation will gradually erode the purchasing power of their retirement savings.

And the CPP is a good fit for Canada's 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 and reflects how Canadians currently live, work and retire.

With the automatic collection of contributions for all workers, the CPP is a simple way to save for retirement.

Honourable senators, Bill C-26 would boost how much each Canadian will get from their CPP pension in the future and help to strengthen the CPP program as a whole. Seventy-five per cent of Canadians support a stronger CPP. Thus, we are in a position to act on one of the highest priorities of Canadians who are looking to ensure a more secure retirement.

While there has been consensus on the challenge before us — few dispute that — some have argued that Bill C-26 goes too far, too fast, while others have made a strong case for doubling the income replacement rate from 25 per cent to 50 per cent.

Senators, our finance ministers found compromise in the middle ground and in achieving beneficial policy outcomes for Canadians by moving the level of income replacement from one quarter to one third. Their agreement especially targets intergenerational equity, something everyone in this room has been positively impacted by since the creation of the CPP 50 years ago.

Honourable senators, I encourage you to support Bill C-26.