The 2025 federal budget

The federal budget released on November 4, 2025 contains certain measures that could impact your organization or business context. Based on the available information, our experts have identified a few items that directly or indirectly affect components of total rewards.

The federal budget highlights two strategic areas that impact Canada’s institutional investment landscape: economic growth and sustainable investment.

In order to supercharge economic growth, the federal government:

• proposes to catalyze investment by banks, insurers and financial institutions by replacing certain legislative limits on portfolio investments and borrowing with more flexible guidance from the Office of the Superintendent of Financial Institutions (OSFI);
• proposes to provide $1 billion over three years to the Business Development Bank of Canada (BDC) to launch the new version of the Venture Capital Catalyst Initiative (VCCI), a “fund-of-funds” that would leverage more private venture capital by incentivizing pension plans and other institutional investor participation, while supporting new fund managers;
• is investing $115 billion in public infrastructure over five years to help the economy grow and improve national productivity.

To support sustainable investment and the transition to net zero, the federal government:

• is reconfirming its support for the arm’s length development of made-in-Canada sustainable investment guidelines (commonly referred to as a taxonomy) by the end of 2026, providing investors, lenders and other economic stakeholders with a reliable tool for identifying “green” investments and those linked to the transition to a low-carbon economy;
• intends to develop a Sustainable Bond Framework to fund measures to reduce carbon intensity in different sectors, which would allow for the issuance of green and transition bonds to be aligned with the Canadian taxonomy, with the potential to gradually incorporate various economic sectors¹;
• intends to work with the provinces and territories to strengthen climate-related financial disclosure, particularly by seeking alignment with international standards and harmonized rules across all federal, provincial and territorial jurisdictions.

The announcements relating to these two strategic areas mean that exposure to infrastructure investments and the integration of sustainable investment criteria into strategies are now even more relevant for institutional investors.

For registered plans (such as RRSPs and TFSAs), the federal government is proposing to simplify and harmonize the qualified investment rules. In particular, this measure aims to simplify the rules relating to small businesses and broaden the categories of qualified investments. It will be interesting to monitor the impacts of this measure on the investment options offered by financial institutions for these plans.

The federal government is proposing to prohibit investment and registered account transfer fees, which currently average $150 per account. The government will also require the timely transfer of these accounts and clear presentation of information on the transfer. These measures are good news for Canadians. Agreements with service providers affected by these measures may need to be adjusted.

In order to reduce the number of federal public servants, the government is proposing to create a temporary, voluntary Early Retirement Incentive program through the Public Service Pension Plan. The program, which would come into effect on January 15, 2026 and be expected to run for one year, would allow eligible employees to retire without the 5% reduction for each year of early retirement.

This program would be sourced from the surplus of the Public Service Pension Fund and would apply to employees age 50 and above or age 55 and above (based on their date of enrolment in the plan) with at least two years of pensionable service and at least 10 years of employment in the public service.

At a time when most defined benefit plans have surpluses, sponsors need to make strategic decisions about how to use or preserve them. While many sponsors are being cautious, and considerations around intergenerational equity are increasingly common, the government is proposing an approach that has been taken less frequently over the past two decades due to a context of significant pension fund deficits and labour shortages. It will be interesting to measure the impact of this strategy, both from a financial standpoint and in terms of achieving workforce reduction targets within the federal public service.

Budget 2025 announces the government’s intention to initiate consultations with its federal employees to determine how their pension benefits could account for Canada Pension Plan (CPP) and Québec Pension Plan (QPP) enhancements. The government estimates that this could save federal employees up to $1,100 in annual contributions.

The outcome of these consultations could influence decision-making for other pension plans whose benefits are coordinated with government pensions.

The federal government has confirmed its intention to maintain the essential social programs Canadians rely on, including the Canadian Dental Care Plan and National Pharmacare Program. Until further developments are announced, no new impacts on your plans are expected.

Our experts will keep you informed of any developments. Would you like more information? Contact your Normandin Beaudry expert or email us.

¹ So far, Canada has issued $1 billion of a 30-year green bond, as well as a $1.5 billion reopening of a 7-year bond, attracting green investors.