OTTAWA — The federal minister in charge of the country’s social safety net says new parents, particularly women, won’t lose out on increased Canada Pension Plan benefits if they leave the workforce to care for young children.
Social Development Minister Jean-Yves Duclos says the Liberals understand the concerns about the wording of what’s known as the CPP dropout clause and plan to push for provincial agreement on new wording to the clause next month.
On Monday afternoon, MPs debated the bill that would expand the CPP with the NDP demanding changes to the dropout clause that they say would hurt those who take time off to care for a new child or ailing parent.
Duclos argues that wouldn’t be the case.
Any time out of the workforce for parental leave or caring for an ailing family member could be a knock against someone in retirement because CPP benefits are calculated on average annual earnings.
The existing CPP system allows parents who temporarily leave the workforce during child-rearing years to exclude that time from the calculation to determine how much they will receive in retirement benefits.
The dropout clause for the expanded portion of CPP is more general, Duclos said, requiring 40 years of contributions to receive the maximum benefits.
“If you start working at 20 years old and retire at 65 years old, you’ve worked for 45 years, you can spend five years out of these 45 years anywhere — it could be travelling, it could be looking after a child, it could be looking after a parent, you could be studying — with no loss in terms of your future CPP benefits,” Duclos said in a roundtable interview with The Canadian Press.
“In a sense, this clause is less clearly linked to maternity, or parental leave, of the earlier, base system.”
The NDP have argued that the wording leaves women who typically take time off to care for a new child in the lurch in their retirement.
Finance Minister Bill Morneau is to meet his counterparts next month, at which time he will ask for changes to either amend the wording of the dropout clause, or craft a whole new section, Duclos said.
“If you want to do that, you need to negotiate with provinces and territories because, as we all know, this a joint program,” Duclos said.
“That’s what the minister of finance will do in December. We’ll say, we’ve done well for everyone, including women, but can we push even further and perhaps adjust our general dropout clause in a manner which is more analogous to the clauses of the base system?”
He said the expanded CPP plan will help workers in low-wage jobs, those who have fewer chances to contribute to a private pension plan scheme, seniors who are likely to find themselves with less money when they retire and those who live longer.
“Women fit all those conditions,” Duclos said.
“The enhanced CPP in its current form will benefit women more than men because of those four characteristics.”
The changes finance ministers agreed to in June will increase the benefits Canadians receive in retirement, increase how much income is eligible for CPP coverage to $82,700, and also increase how much employees and employers pay in premiums to cover the changes.
Contributions by employees and employers would gradually increase over seven years starting in 2019, with Canadians paying between $9 and $42 more into the plan every two weeks once the changes are fully implemented. Future retirees would receive benefits equal to about one-third of their average annual incomes, up from one-quarter.