OTTAWA, Sept 19 (Reuters) - The Canadian government’s plan to expand the national pension plan will see the cap on earnings rise 14 percent by 2025, finance officials said on Monday, as the country looks to beef up its retirement plan amid worries workers aren’t saving enough.
The new 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 changes.
Starting in 2019, the pension 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 eligible earnings will be increased by 14 percent to reach C$82,700 ($62,718) by full implementation in 2025.
The 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 government must still table legislation to make the changes. Once the legislation is passed federally, it will require approval from seven of the 10 provinces.
Eight of the provinces signed on to the agreement in principle in June, while 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