Manitoba Proposes Amendments to CPP Enhancement

The Manitoba government has responded to the agreement in principle to expand the Canada Pension Plan (CPP) concluded June 20, 2016. Manitoba’s Finance Minister Cameron Friesen wants all provincial and federal finance ministers to take more time to talk about the enhanced Canada Pension Plan before finalizing the agreement by July 15, 2016.

The expansion of the pension plan would go into effect in 2019 and would see CPP premiums and benefits increase gradually. Under such an agreement, a Canadian with $50,000 in constant earnings throughout his or her working life would receive a yearly pension benefit of around $16,000 (instead of the $12,000 they would currently receive) after the phase-in period that begins in 2019 and ends in 2025. It will also mean that when Canadians retire, their maximum payout will rise to $17,478 a year, which is one-third more than the current maximum of $13,100. More on the agreement in principle can be read here.

Ministers from every province except Manitoba and Quebec signed off on the agreement in principle. Friesen says it would have been unwise for the newest government in the country to rush into something.

Manitoba Premier Brian Pallister added to Friesen’s statements by saying that the plan to increase premiums ignores the responsibility that people have to put away money for themselves.

Friesen says he supports the idea of people having a more secure retirement. However, he proposes the following amendments to the agreement:

  • Consider low-income single seniors. Given the special circumstances facing single seniors, Manitoba would like the federal government to consider eliminating the claw back of guaranteed income supplement payments for widowed seniors’ CPP survivor benefits.
  • Indexation of the death benefit. Currently the CPP death benefit provides a maximum one-time payment of $2,500 to the estate of a deceased CPP contributor. This maximum was set in 1997 and frozen, substantially reducing the value of the benefit over time. Manitoba believes the maximum death benefit should begin to grow with inflation as part of this CPP enhancement.
  • Enhance affordability through extension of phase-in of the upper earnings limit. The current proposal allows five years for the phase-in of the increase in the contribution rates up to the current upper earning threshold. Given the magnitude of the increase in contributions related to enhancing the year’s maximum pensionable earnings (YMPE), Manitoba believes a similar amount of time should be provided to adjust to this change. Therefore, it is proposed the phase-in of the enhanced YMPE should be increased to four years from two.
  • Commit to a comprehensive review of the other CPP benefits. While it is assumed that all CPP benefits, including survivor and disability benefits, will be increased in proportion to the enhancements outlined in the current approach, this should be explicitly stated in the AIP.

In Friesen’s opinion, the above proposals would augment the agreement in principle. The proposals have been received with interest and support by other jurisdictions, said Finance Minister Cameron Friesen.

The only money that’s going to ever come out of the CPP is what’s put into it. This isn’t about governments being generous to you. This is about the people in the plan, Canadians who contribute as employees and/or as employers, getting money out later.”

CPP is a key pillar to retirement security for Manitobans and Canadians, but it is not the entire solution,” said Friesen. “This is a once-in-our-lifetime chance to modernize the CPP, to make it more compassionate and more responsive to the changing needs of Canadians.”

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