Federal government proposes letting people voluntarily contribute more to CPP

Click here to read “Federal government proposes letting people voluntarily contribute more to CPP” by Jason Fekete – Ottawa Citizen, May 26, 2015

The Conservative government is proposing to let Canadians voluntarily contribute more to the Canada Pension Plan to allow them to save more for their retirement – a significant policy shift just months before the fall federal election.

For years, the Conservative government resisted calls from provinces and seniors’ groups for a mandatory enrichment of the Canada Pension Plan. On Tuesday, Finance Minister Joe Oliver said the government is now willing to let Canadians voluntarily contribute more to CPP.

Oliver said the government will consult experts and stakeholders over the summer on options for allowing voluntary contributions to the CPP on top of current mandatory monthly payments.

“Our government understands that Canadians want low taxes and the freedom to make their own financial decisions,” Oliver said in the House of Commons.

The finance minister maintained, though, that a mandatory increase in contributions would amount to a “job-killing, economy-destabilizing, pension-tax hike” on employees and employers.

Prime Minister Stephen Harper and the late former finance minister Jim Flaherty had resisted calls from the provinces to enrich the CPP. The provinces have accused the federal Conservatives of unilaterally blocking their efforts to enhance CPP. Ontario, unwilling to wait for federal action, instead is creating its own new mandatory provincial pension scheme, the Ontario Retirement Pension Plan, to take effect Jan. 1, 2017.

The Ontario Liberal government assailed Oliver’s pledge as little more than an election ploy.

“It’s disappointing that the federal government is only concerned with their short-term election prospects instead of providing a secure retirement for millions of Canadians,” Mitzie Hunter, Ontario’s associate minister of Finance, said in an emailed statement.

The Conservative government’s announcement is a huge change in policy that is undoubtedly targeted at middle-class voters heading toward the Oct. 19 election.

The Tories hope the pledge will steal some thunder on the campaign trail from the Liberals and NDP, who have been highlighting the plight of some struggling middle-class Canadians and promising CPP enhancements.

The average CPP monthly benefit (taken at age 65) is about $640, with a maximum monthly payment of $1,065. Provinces and groups such as CARP that represent retired Canadians have been calling for a mandatory, modest increase in contributions.

“A nice piece of electioneering,” Susan Eng,
vice-president of advocacy with CARP, said Tuesday of the government’s announcement. “That’s a 180 (degree turn) … That’s something they’ve resisted all along. They’ve had five years to do it before this.”

Many Canadians haven’t socked away enough money for their golden years, she said, so a mandatory increase in contributions would work much better than a voluntary option.

The federal NDP has proposed working with the provinces on phased-in increases to basic CPP benefits to provide more retirement security for Canadians.

Liberal Leader Justin Trudeau has promised to work with the provinces, workers and employers to enhance the CPP, along with exploring other alternative saving vehicles.

“But the CPP itself must be enhanced,” Trudeau told CARP members last fall.

In December 2013, provincial finance ministers who gathered for their annual meeting with then-finance minister Flaherty said a majority of provinces agreed to examine how and when to potentially boost CPP contributions to help Canadians save more for retirement.

However, Flaherty and the federal government maintained there was no consensus and that it was not an appropriate time to proceed with the CPP payroll tax increases, which they said would take money out of the pockets of workers and force employers to cut jobs, hours and wages.

Instead, the federal government has trumpeted voluntary savings options such as tax-free savings accounts and its new pooled registered pension plans for individuals who don’t have access to a workplace retirement savings option.