Dwight Duncan on CPP Enhancement

Dear CARP Members:

Retirement planning has always been a source of stress on the family budget and recent economic uncertainty has increased this concern. Many Ontarians experienced declines in their registered retirement savings plans and pension plans have seen investment losses — even those with a diverse set of investments.

Canada has one of the world’s strongest retirement income systems, offering many different vehicles for saving. We can be proud of the fact that the rate of seniors’ poverty has seen a significant decline over the past few decades and is now among the lowest in the world. To further strengthen Canada’s retirement income system for Ontarians, the McGuinty Government has launched a comprehensive plan that consists of three key elements:

– reforming Ontario’s employment pension system, balancing the interests of employee pension plan members, pensioners and plan sponsors;

– protecting employee members and pensioners by responding to the impacts of economic uncertainty on employment pensions; and

– strengthening Canada’s retirement income system by supporting a modest, phased-in, fully funded enhancement to the Canada Pension Plan (CPP), as well as exploring innovative ideas (e.g.. Pooled Registered Pension Plans and Target Benefits) to improve employment pension coverage in a cost-effective manner.

Current tax and pension rules state that pension plans can only be offered where an employment relationship exists, which limits the retirement savings options available to the self-employed. Smaller firms often cannot or do not provide a pension or retirement savings option to their employees due to the relatively high costs of administration. The Pooled Registered Pension Plan (PRPP) option could expand the range of institutions that can set up pension plans, and the range of people who can access them. Large pools of capital could reduce costs and help improve investment returns.

We support, in principle, the federal government’s PRPP proposal, and are reviewing whether the new federal PRPP legislation meets the needs of Ontarians. However, this type of pension innovation is only one complementary tool to help Canadians save more for retirement. We believe that there have to be modest enhancements to the CPP over time as part of a broader reform to improve retirement income security.

The CPP is secure, efficient, portable and sustainable. A fully-funded, modest enhancement would provide a significant benefit to workers when they retire, and strike a balance between the need for more predictable retirement incomes and additional costs for businesses and individuals. I look forward to continuing this discussion with the federal government and other provinces and territories at this year’s upcoming Finance Ministers’ Meeting.


Dwight Duncan
Deputy Premier
Minister of Finance