(Adds comments from Morneau, details on maximum benefit,
OTTAWA, Sept 19 The Canadian government's plan
to increase workers' retirement benefits will raise the limit on
eligible wages by 14 percent, officials said on Monday, as the
country looks to bolster its retirement system amid worries
people are not saving enough.
The Liberal government reached an agreement in principle
with the provinces in June to improve the pension plan after the
previous Conservative government had refused to consider
Canada, like many other countries, faces the growing
challenge of caring for its aging population. Low economic
growth prospects globally have also raised worries that younger
generations will need to save more to retire.
Indeed, younger workers will get the most benefit from the
proposed changes to the national pension plan, which will come
into effect over a seven-year period. Officials estimate that
about 24 percent of families nearing retirement age risk not
having enough income to maintain their standard of living.
"We're focusing on the long term, recognizing that too few
Canadians have a situation where they're going to be able to
retire in dignity," Finance Minister Bill Morneau told
Starting in 2019, the plan's income replacement level will
gradually be increased to one-third of eligible earnings, from
the current one-quarter, officials said.
The cap on those earnings will rise by 14 percent to
C$82,700 ($62,718) by 2025.
In current dollar terms, the maximum annual retirement
benefit will increase to nearly C$20,000 from the current
C$13,110. The planned pension enhancement will be fully funded,
as required by existing legislation.
A higher contribution rate on earnings below the yearly
maximum will be phased in over the first five years and is
estimated to be 1 percentage point higher for both workers and
companies by 2023.
In 2024, a separate contribution rate expected to be 4
percent will kick in for earnings above the upper limit
projected at the time.
The enhanced portion of employee contributions will be tax
deductible, officials said.
The government must still table legislation to make the
changes and Morneau told a parliamentary committee he would move
forward on that this fall.
Once the legislation is passed federally, it will require
approval from seven of the 10 provinces.
Eight provinces signed on to the agreement in principle in
June, and Manitoba has since come on board. Quebec, which has
its own pension plan, did not sign on but expressed support.
($1 = $1.3186 Canadian)
(Reporting by Leah Schnurr; Editing by Chizu Nomiyama and