CPP is the best deal on offer
Bill Robson of the CD Howe Institute argues in today's Globe and Mail that expansion of the Canada Pension Plan would come at the expense of the young. His key point is that any shortfall in investment returns would be financed by bigger contributions from younger generations, whereas any higher than expected investment returns would primarily benefit older contributors.
Robson is correct to note that we cannot be sure about future investment returns, so the premiums required to pay for an expanded CPP may indeed have to be adjusted. But a review is already mandated to take place every three years when the provinces and the federal government meet to determine if premiums or benefits should be changed based on the performance of the investment fund and other factors.
Mandated reviews every three years essentially guarantee that premiums and benefits will be adjusted so that there is fairness between generations.
Any CPP expansion would have to be done on a fully funded basis. This means that every generation will more or less bear the cost of paying for its own benefits. As for the young, a bigger CPP would provide a decent defined benefit pension fully indexed to inflation at a much loser cost than any available alternative.
No, the precise cost of a fully funded plan cannot be known in advance; but it remains the best deal on offer.
Photo: Tania Liu. Used under a Creative Commons BY-ND 2.0 licence.
*Editors note: a previous version of this post incorrectly linked to the wrong Globe article.