The Canadian Press
Adding an extra but voluntary layer to the Canada Pension Plan seems to be emerging as the idea that can attract the most national support for pension reform, says British Columbia’s finance minister.
Colin Hansen said in an interview a voluntary, supplemental plan that uses the CPP as a base is probably the most workable option among the many being tossed about these days.
“The first priority for me is to get as broad a pan-Canadian plan as possible, and if we can achieve that with a supplemental plan, then great,” Hansen told The Canadian Press.
While all options are still officially on the table as provincial and federal authorities consult with the public, ministers hope to pare them down in the next couple of months. In May, they want to make a collective decision about which path to pursue.
A paper released by Hansen last week, on behalf of all the provinces, highlighted two main options: a voluntary supplemental plan to the CPP, and an expansion of the CPP that would be mandatory for employers and employees. The paper dismissed private-sector proposals.
But in the interview, Hansen recognized that an expansion of the CPP may not sit well with struggling companies who would be forced to increase their payroll taxes.
“Those arguments lead to the conclusion that the voluntary plan would be more desirable,” Hansen said.
“If we were to try to implement this today, we would get great pushback from the private sector, who basically could not afford an increased burden of an increased payroll tax. If it’s a voluntary program then that helps mitigate that problem.”
The federal Liberals favour a voluntary supplement to the CPP as a way to make sure Canadians have enough savings to maintain their standard of living when they retire.
Some critics say a voluntary approach would leave individual contributors exposed to too much investment risk. But there are many different ways to set up a voluntary supplement to the CPP, Hansen pointed out.
The federal NDP, labour groups and some retiree groups, on the other hand, prefer the mandatory route, since it would be more cost-effective to run, and would ensure everyone is well taken care of.
Former Bank of Canada governor David Dodge, who has a keen interest in pension reform, has dismissed the mandatory option as a “nanny state” approach.
Overshadowing British Columbia’s urgings to move forward on the pension reform agenda is the province’s threat to go it alone if the federal government doesn’t co-operate.
“There’s no question that the CPP is a very cost-effective way of providing some very sophisticated fund management. They’ve got the reputation, they’ve got the credentials,” Hansen said.
“But having said that, if that’s not workable, we’re certainly prepared to look at going alone, and independent of the CPP framework.”
B.C. and Alberta, among others, have said they are convinced that the pension system is inadequate in their provinces, and improvements are needed urgently.
They’ve also said national reform would be the best option, since workers would then have better pension mobility, and since a national pension system would have better economies of scale than a provincial plan.
In Whitehorse in December, the federal and provincial governments agreed to work toward national improvements — starting with cross-country consultations to narrow down the options, and leading to a decision-making meeting in May.
But now, a month has passed, and Ottawa is still talking with the provinces about how those consultations should roll out.
The stall has led some observers to wonder if they will happen at all, especially since renowned economist Jack Mintz did a research paper for the governments in Whitehorse that concluded Canada’s retirement system is in fairly decent shape, for now.
Plus, there appears to be little consensus among the governments about which direction to take.
Insiders say Ontario is reluctant to rush into any new pension program that would cost taxpayers money, since it is already paying a political price for introducing the Harmonized Sales Tax.
“The problem is one that’s looming. It’s going to become a problem and, in fact, I believe if we don’t act it will become a crisis,” Hansen warned.
“If we ignore it for 10 years, it will be a problem that at that stage may not be solveable for the next generation of retirees. In other words if we don’t act now (or) in the near future, then the problem will become that much more difficult to solve for those that follow us.”
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Voluntary top up to CPP most likely to garner support in pension debate, BC says
Many different ways to set up a voluntary supplement to the CPP
- By: Heather Scoffield
- January 26, 2010 October 31, 2019
- 15:05