More than five years ago, Prime Minister Stephen Harper and his Conservative government briefly considered expanding the universal, contributory Canada Pension Plan (CPP, paralleled in Quebec by the Quebec Pension Plan, QPP).
After some cursory study they rejected the idea.
The late Finance Minister, Jim Flaherty, quite unabashedly said he did not want to cut into the business of the financial private sector.
Many provinces, including Ontario, British Columbia and Alberta, advocated for either an enhanced CPP/QPP, with increased payouts financed by increased obligatory contributions, or an option for Canadians to voluntarily increase their contributions to the CPP in order to get richer pensions.
The Harper government gave both of those suggestions short shrift.
Instead, its response to the inadequacies of the Canadian retirement system was yet another gift to the financial industry, the Pooled Registered Pension Plan.
As we wrote in this space in 2011, that plan “makes it possible for self-employed Canadians and small businesses to take part in what will be, in effect, giant Registered Retirement Savings Programs (RRSPs) — all administered by the same folks who presided over the huge retirement savings losses of 2008.”
Even some on Bay Street want a bigger, better CPP/QPP
In 2011, David Denison, the then-head of the agency that invests the CPP’s money, the Canadian Pension Plan Investment Board, advocated for the same solution as the NDP and the labour movement.
Denison had been a well-established and highly respected Bay Street executive.
He pushed the idea of an enhanced, compulsory, universal CPP/QPP.
This is what he said, in 2009:
“A mandatory national plan creates scale and certainty of cash inflows that permit the effective pooling of… risk. With no dependence on a plan sponsor, and so no solvency risk, we are able to manage the Fund from a sustainability perspective — in our case, over the span of 75 years — rather than from the triennial solvency funding perspective of an employer-sponsored defined benefit plan. This is an enormous advantage.”
Denison was painfully aware that the private pension savings system is enormously costly and inequitable.
The main private sector vehicle, the RRSP, like so many other boutique tax measures, disproportionately favours the wealthy.
Plus, a study commissioned by the provincial finance ministers showed that the RRSP had “little success in filling the gap in retirement savings” even among its more-affluent-than-average clients.
The study showed that even when RRSPs have achieved some success for Canadians, it has been at an excessive cost: “Where the industry has been successful, such success has been accompanied by some of the highest management expense ratios in the world — particularly for mutual funds.”
The labour movement, both opposition parties, and many who seriously studied the pension system, such as economist Monica Townson, encouraged the Harper government, in the early years of its mandate, to engage Canadians in a thorough discussion of their pension options.
The government was not interested.
‘Pensions should not be an election issue’
Prior to the last election, former Parliamentary Secretary to the Finance Minister, Ted Menzies, claimed that his government did not want pensions to become an election issue.
“Party politics should play no role in retirement income adequacy,” he said.
Then the Harper government made the issue 100 per cent partisan.
Every time opposition members broached the issue, Prime Minister Harper and his colleagues would say that Canadians do not want “more taxes,” and hurl the usual accusations that New Democrats and Liberals only want to tax the life out of the economy.
Now, on the eve of the next election, Harper’s Finance Minister, Joe Oliver, has resurrected the pension issue again.
He did not mention pensions in the recent budget.
Nor did he slip a change to the CPP/QPP into the current omnibus budget implementation bill — the Conservatives’ favourite legislative device.
Instead, Oliver announced that, after the House rises, there will be some sort of election-eve consultation.
There is no commitment, very little of a plan, and, even now, the Conservatives are limiting the conversation.
They will only consult on the idea of increased voluntary contributions.
They are closed to the idea, supported by the province of Ontario and many who have examined the pension question deeply, that the best route would be an expanded, compulsory CPP/QPP.
There are intimations even from within the federal bureaucracy that those who do their best to provide evidence-based advice to a government notoriously indifferent to evidence favour expanding the mandatory CPP/QPP
After all, Canadians might be shocked to consider that the public pension plan of their neighbours to the south is much more generous than Canada’s.
Social Security maximum is $50,000 vs CPP/QPP + OAS at $19,000
The Americans call their plan Social Security, and it goes back to Franklin Roosevelt’s time in the 1930s. (Canada only instituted its CPP/QPP in the 1960s.)
Social security’s maximum insurable earnings are about twice the CPP/QPP’s (over $100,000 versus somewhere in the $50,000 range) and its contribution level and payouts are commensurately higher.
The maximum Social Security annual retirement benefit is well over $50,000.
The maximum combined CPP/QPP and Old Age Security (OAS) benefit in Canada is about $20,000. OAS is the universal benefit available to all Canadians over 65. It is a fixed rate, not based in contributions, and is clawed back from higher income earners.
Is there political will to expand Canada’s retirement system?
The United States is hardly a model welfare state, and, over the years, American legislators have brought in a number of nasty restrictions to Social Security.
One of the most recent came in 2009, when they took Social Security away from prisoners.
As well, the American retirement system has no component comparable to the Canadian OAS, available to all regardless of contributions. Nor does it have Canada’s supplementary benefit for low-income people over the age of 65, the Guaranteed Income Supplement (GIS).
(Harper’s government has legislated that the eligible age to receive the OAS and GIS will be pushed from 65 to 67.)
But the United States is way beyond Canada in its compulsory, public, contributory system.
Canada has the resources and capacity to do much better.
But it will take political will.
Vaguely defined consultations limited only to the option of increasing voluntary contributions to the CPP/QPP will not do the trick.
They may, however, provide useful election campaign props.
Photo: flickr/ Danielle Scott