Originally published June 11st, 2010. To read this article on the Canadian Business Website, Read more
OTTAWA – The consensus around the cabinet committee table, one cold winter day earlier this year, was to let the pension-reform file die an early death.
The provinces had backed off. Ottawa was armed with research concluding retirement income was adequate for most people. Any change to the system was laced with complicated pros and cons that would be tough to sell.
Letting the issue fade away, perhaps with the help of a few regulatory changes and tax incentives here and there, would be easy enough.
But the consensus lacked a key player: Prime Minister Stephen Harper. He wanted to see significant action on pensions, and he wanted it right away, sources say.
The prime minister’s wishes have been granted.
After months of appearing neutral or even dismissive of pension reform, Finance Minister Jim Flaherty suddenly informed his provincial colleagues this week that he thinks major changes are necessary, and he wants their support.
Financial institutions should be given the regulatory freedom to provide more pension options at low cost, especially to self-employed people and small businesses. And the Canada Pension Plan should be gradually and moderately expanded, he said.
Still to come are any details about how much the CPP benefit could increase and how much premiums might rise. But the fact Ottawa has agreed in principle to such changes is being welcomed by many pension experts.
“This is actually a tremendous breakthrough,” said Susan Eng, vice-president of advocacy for the huge seniors’ lobby group, CARP, and a tireless advocate for pension reform.
With Ontario and some other provinces onside, there is widespread optimism that when federal and provincial finance ministers meet in Prince Edward Island this Sunday and Monday, they will agree to push the plan forward.
“I think it’s one the provinces can buy into,” said economist Jack Mintz, who heads the University of Calgary’s School of Policy Studies.
Ottawa couldn’t move immediately on Harper’s orders last winter, since it had already committed to public consultations. But the consultations this spring served to validate Harper’s instinct on the issue.
Ordinary citizens and analysts alike repeated that the future for many retirees looked uncomfortable. Financial services companies have been competing against each other to offer new alternatives. Unions, retired people and municipalities have been forming alliances pushing the federal and provincial governments to step up.
“He (Flaherty) felt the heartbeat of Canada on this one,” said Ken Georgetti, president of the Canadian Labour Congress, who sent staff laden with data to many of the hearings.
“There are a lot of votes out there on this issue. It’s grey power.”
Mintz, a pension expert whose advice has been sought frequently by the federal government, watched a similar sentiment arise in the pension expert community.
He held a key conference in April, where the Alberta finance minister, Ted Morton, hogged the spotlight by saying he had no interest in major pension reforms for another 10 years.