Click here to read “Ottawa to consider voluntary Canada Pension Plan expansion, Joe Oliver says” by Gary Marr – Financial Post: Retirement, May 27, 2015
The federal Conservatives announcement Tuesday, proposing a plan that would allow Canadians to opt in to an expanded Canadian Pension Plan (CPP), might just be the best compromise there is.
It would enhance a plan that Canadians trust. And unlike Ontario’s own proposal for a mandatory provincial pension plan, the voluntary CPP enhancement would be national and portable from province to province.
The trick will be convincing the very workers it would presumably be designed to help — those failing to save enough for retirement — to even sign up.
Finance Minister Joe Oliver telling the House of Commons that his government will study whether to allow Canadians a voluntary option to contribute more to supplement their retirement savings, comes in the wake of criticism that CPP and Old Age Security won’t be enough to keep up standards of living for middle-class families once their earning years are done.
But the Tories have said they won’t force larger CPP deductions on employees and employers, as the federal Liberals have vowed to do, and as Ontario’s Liberal government has said it will do with its own pension scheme.
“To build on our current world-class system, we intend to consult with experts and stakeholders during the summer on options for allowing voluntary contributions to the Canadian Pension Plan,” said Oliver.
“However, our government will not force Canadians into a mandatory, job-killing, economy-destabilizing, pension-tax hike on employees and employers…We believe that Canadians are best placed to decide how to save for their retirement with voluntary options, rather than have tax hikes imposed on them.”
There is little doubt that the CPP, as it is currently constituted, will hardly keep middle-class Canadians in good shape for retirement. The maximum payment in 2015 based on retirement at age 65 was $1,065 per month.
Oliver’s announcement already managed to take some of the sting out of some criticism that the Conservatives were too soft on pension issues.
“It’s never too late for change,” said Susan Eng, vice-presidency of advocacy for CARP, which represents retired Canadians. Although she said she still wants the government to take action immediately. “We’ve been talking about this since 2010.” She points out that unless employers are made to match contributions, the proposal is less attractive. A Tory spokesperson said that is being studied.
But the Canadian Taxpayers Federation said forcing employers to match contributions would be unacceptable. “If people want to exercise an option to save through a government investment vehicle, that’s one thing; to force them to, and to impose that additional cost on businesses as well, would be unwelcome,” said Aaron Wudrik, the CTF’s federal director.
Whether Canadians will want to participate depends in part on if the plan comes with some kind of external subsidy, says Finn Poschmann, vice-president of policy analysis at the C.D. Howe Institute.
To build on our current world-class system, we intend to consult with experts and stakeholders during the summer on options for allowing voluntary contributions to the Canadian Pension Plan
“But if it is actuarially fair, people may (also) join because they like the presumed security of a government plan,” he said.
Even better, he said, if the federal plan takes the steam out of provinces “freelancing” with their own plans. However, Ontario’s associate finance minister was quick to pounce on Oliver’s statement. “We need action now to help Canadians achieve a secure income in retirement. Once again the federal government has made it clear they have no real interest in enhancing CPP,” she said.