As the new Liberal government takes office, the Canadian Life and Health Insurance Association (CLHIA) argues that it should not plan major changes to the Canada Pension Plan (CPP).
The insurance industry is gearing up for a possible tussle over the federal Liberal election pledge to enhance the CPP. In a letter to Prime Minister Justin Trudeau, CLHIA president and CEO, Frank Swedlove, argues that major changes to the CPP are not necessary.
“The CPP is an important component of Canada’s public pension pillar and offers Canadians a base level of retirement income. However, it was not intended to be the sole source of income in retirement and while modest increases to the CPP may be appropriate as time goes on, the CPP should not take on a different role than was originally intended,” he says in the letter.
The insurance industry is trying to get the new retirement savings vehicle that was developed by the previous administration — Pooled Registered Pension Plans (PRPPs) — off the ground. “Most Canadians are on track for retirement, and a targeted solution is needed for those without adequate savings, who tend to be mid-income earners without access to a workplace plan. PRPPs provide such a targeted solution, but need time to gain traction before they are fully established,” Swedlove says in his letter.
It’s not clear what the new government has in mind in terms of possible changes to the CPP. However, it has signalled a preference for addressing retirement readiness through the public pension system, rather than the private system. It is promising to roll back the annual contribution limits for tax free savings accounts, to bolster Old Age Security and to negotiate enhancements to the CPP with the provinces.
In addition to raising the CPP issue, the CLHIA also recommends that the government introduce a non-refundable 15% tax credit to encourage Canadians to purchase long-term care insurance. “Such a tax credit, along with the provincial equivalent, would act as an important signal from the government to Canadians about the need to plan and take financial responsibility for their potential long-term care needs,” it says.
The trade group lauds the new government’s plans to bolster infrastructure investment and it calls on the government to involve the insurance industry in those plans. “With Canada’s infrastructure deficit estimated to be up to $400 billion, ongoing investments in Canadian infrastructure will require the use of innovative financing arrangements, such as public-private partnerships (P3s). P3s are one of the most mutually beneficial ways for long-term investors to support government priorities, while also allowing governments to access the significant capacity and appetite of Canadian private investors,” it says.
“Canada’s life and health insurance industry supports infrastructure projects in the country and has a strong appetite to do more to keep Canada moving forward,” it adds. “We encourage the government to take a leadership role in bringing different levels of government and investors, including the life and health insurance industry, together to discuss solutions to Canada’s infrastructure deficit.”
Finally, the industry says that the “current system of prescription drug coverage is in need of major reform if it is to serve Canadians well in the long-term.” In particular, it says that the agency that regulates drug prices, the Patented Medicines Prices Review Board (PMPRB), “needs to be fundamentally reformed in order to drive prices down.”