When the federal and provincial finance ministers meet on June 20-21, they will have to decide whether or not to enhance the Canada Pension Plan (CPP) as promised by the Liberals in the last federal election. This will require the support of at least seven provinces with a combined two-thirds of the population and, effectively, a broad public consensus.
In that context, it is encouraging that the leading business organizations of all provinces but Alberta endorsed a modest expansion of the CPP in a letter sent to finance ministers on June 1.
A recent study from the Fraser Institute claims boosting premiums to pay for higher Canada Pension Plan benefits would not work, since individuals would simply save less in RRSPs and other individual savings vehicles. Thus there would be no overall increase in retirement income, and individuals would have less flexible access to their savings because CPP contributions are effectively locked in.
The Fraser Institute has released a new report purporting to show that the real cost of operating the Canada Pension Plan is $2 billion per year, or four times as much as shown in the financial statements of the CPP Investment Board.
The Canada Pension Plan is hiding the fact that its administrative costs have more than tripled since 2006 because of transaction and external management fees, according to a new report from a conservative think-thank.
Finance Minister Jim Flaherty says the economy is too weak to support a modest, phased-in increase in Canada Pension Plan (CPP) premiums divided between employers and employees.
This is disputed by experts, and also contradicts Conservative messaging in two important ways.
First, in every other context, from the Speech from the Throne, to the recent Economic and Fiscal Update, the Conservatives have bragged about Canada's economic performance and highlighted the chances of a strong recovery. Except when it comes to the CPP debate, "the land is strong."
Today, Finance Minister Jim Flaherty said he is opposed to the provincial proposal to expand the Canada Pension Plan (CPP) because it is not a “modest” proposal and would cost jobs. In fact, according to pension expert Robert Brown, the provincial plan would gradually raise employer CPP premiums by 1.55%, starting at earnings above $25,000.
The Oct. 19 Globe and Mail editorial supporting expansion of the Canada Pension Plan (CPP) got it exactly right. The CPP is “one of the country’s great public policy successes” and “the best [savings plan] we’ve got.”
Notwithstanding evidence that many middle-income earners will face a sharp decline in living standards in retirement as a result of the erosion of employer pension plans and very low rates of private savings, the Harper government has refused to endorse the emerging provincial government consensus in favour of CPP expansion. The main argument against seems to be that the required increase in contributions (about 3 per cent of earnings) would amount to a damaging tax increase.