Ontario Retirement Pension Plan (ORPP) scrapped
Ontario’s Finance Minister, Charles Sousa, has announced that Ontario will not pursue setting up the ORPP, now that Canada’s Finance Ministers have agreed to enhance the CPP, starting January 1, 2019.
IFB has been vocal in its opposition to the ORPP because it would increase costs and compete against private sector retirement plans already in place – many of which would have been discontinued by employers who could not afford to contribute to both plans.
Under the enhanced CPP:
- Income replacement will increase from 25% to 33% of pensionable earnings, e.g. a person earning $50,000 throughout their working life would receive a yearly pension benefit of around $16,000 instead of the $12,000 they would currently receive.
- The maximum amount of income subject to CPP will increase by 14% – equal to roughly $82,700 in 2025.
- Contributions will be phased-in starting January 1, 2019, with full implementation by 2025, to allow more time for businesses to adjust.
- The federal Working Income Tax Benefit will be enhanced to offset the impact of increased contributions on low-income workers.
- Employee contributions for the enhanced portion will be treated as a tax deduction—instead of a tax credit—to avoid increasing the after-tax cost of saving for Canadians.
The agreement includes British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador, with Quebec and Manitoba agreeing to remain part of the discussions moving forward.