June 19, 2016 1:53 pm
Updated: June 21, 2016 9:45 pm

5 things you need to know about proposed CPP deal

WATCH ABOVE: A majority of provinces have agreed to changes to boost the Canada Pension Plan. Starting in 2019, you'll see more money coming off your paycheque for CPP contributions, and businesses will be paying more too. But, critics say the changes will hurt more than help. Vassy Kapelos explains.


VANCOUVER – Finance Minister Bill Morneau met his provincial and territorial counterparts in Vancouver on Monday and reached an agreement with most of them to expand the Canada Pension Plan. Here are five things to know about CPP and the proposed deal:

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1) The system is designed so that each generation of workers pays for its own retirement. That makes it different from two other income replacement programs for seniors and retirees: old age security (OAS) and the guaranteed income supplement (GIS). Those measures are covered through general tax revenues, meaning that workers today pay taxes to raise the incomes of poorer seniors.

READ MORE: Feds, most provinces agree on CPP reform, but not Quebec or Manitoba

2) CPP premiums have only been raised once in the last 20 years. In 1997, finance ministers agreed to a phased-in increase in premiums to ensure one generation of workers wasn’t paying for another generation’s retirement. The argument today is that the CPP should pay more in benefits and help those who aren’t saving enough for retirement. The argument against raising premiums is that it would hit workers’ wallets at a time when governments keep saying the economy is fragile.

WATCH: Finance Minister Bill Morneau says CPP reform will be very gradual

3) Under Monday’s agreement, which would go into effect in 2019, an average Canadian worker earning about $55,000 will pay an additional $7 a month in 2019. That would increase to $34 a month by 2023. Once the plan is fully implemented, the maximum annual benefits will increase by about one-third to $17,478 from $13,110.

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READ MORE: Worried they’ll outlive their savings, 3 in 4 Canadians want CPP expansion: poll

4) Not every province has to have the CPP. Quebec has its own version. Saskatchewan has its own pension plan, but the payments are voluntary, acting more like a RRSP. Along with Quebec, Manitoba didn’t sign onto the deal on Monday.

WATCH: Ontario Finance Minister Charles Sousa comments on CPP reform

5) Ontario had planned to launch its own pension plan if changes weren’t made to CPP, but with Monday’s agreement-in-principle Canada’s most populous province said it will back away.


© 2016 The Canadian Press

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