In less than a week’s time, Finance Ministers from across the country will be gathering in Ottawa. We know that the one of the topics they will discuss — if only because P.E.I.’s Wes Sheridan and Ontario’s Charles Sousa will be there — is the idea of reforming the Canada Pension Plan (CPP) so that benefits will gradually rise over the next few decades.
The CPP was established a generation ago, in 1965 — part of the welfare state, one of the social programs that stretched from medicare to public education, (un)employment insurance and welfare to retirement security. But unlike many other social programs, the CPP was always 100 per cent funded by workers and their employers.
Since 2003, the CPP contribution rate has been set at 4.95 per cent for each side for the first $50,000 (that’s an approximate figure — there are small annual adjustments to bring this figure to the average Canadian annual wage) that you make. Employers match the 4.5 per cent rate.
At retirement, workers are guaranteed 25 per cent of their earnings, up to a maximum of that approximate $50,000. For the past few years, that has meant that the most lavish CPP pension comes in just over $12,000. It’s hardly a princely sum upon which to retire. And as with Employment Insurance, it’s important to note that the government does not fund CPP, it merely facilitates it through legislation and monitoring.
I won’t rehash in detail all the good things about the CPP: it’s portable, it’s cheap and efficient and actuarially sound for as long as actuaries can predict. Experts across the board think the CPP has been and continues to be the best bet for Canadian workers. Only outliers like the Fraser Institute and the Canadian Federation of Independent Business (CFIB) oppose CPP enhancement; most people with a semblance of economic sense understand that the CPP is “the best vehicle for boosting retirement savings” — that’s CIBC CEO Gerry McCaughey.
We’re now nudging up against the year 2014 and the CPP still remains a signature of Canadian social security for seniors. But the 25 per cent replacement rate desperately needs to be revised upward if my generation of workers is to have any kind of retirement security. And that is true for all workers younger than me — fewer (and as we go down in age, far fewer) young workers have pension plans through their workplaces. Expanding the CPP is the solution to the uncertainty that faces most young workers.
In order to change the rate of contribution, two thirds of the provinces with 66 per cent of the Canadian population need to be on board. The Harper government is muddying the waters by talking about needing unanimity. They might need that for Senate reform but not for CPP reform! The necessary levels of provincial support to amend the CPP are in hand, but the federal government has been dragging its heels on this file since 2010.
It’s beyond time to bring in federal legislation to move on CPP expansion. Nine of ten provincial governments are either supportive or not opposed to CPP expansion with Ontario, Manitoba and P.E.I. actively pushing for it. Only Saskatchewan is actually opposed; while Alberta and New Brunswick are more in the “maybe but not just now” camp.
The rest of the country — British Columbia, Quebec, Nova Scotia and Newfoundland and Labrador — have also signalled their willingness to go along with federal legislation.
The CPP fix for generations is tantalizingly close. Even the ultra-right can see this; and all provincial and territorial finance ministers, including those from Saskatchewan, Alberta and New Brunswick agree that something must be done. I suspect that’s why the CFIB has been on a blitz over the last couple of weeks, campaigning vocally and publicly against the emerging consensus in Canada that this Finance Ministers’ meeting will stop talking and start doing.
The Neanderthal right thinks that the Canadian economy is still too weak to sustain a 0.43 per cent CPP contribution hike for each of the next seven years. Well, the plan that the Canadian Labour Congress –and now the NDP — are promoting, a plan which has been endorsed by voices as diverse as the Calgary Herald and the Vancouver Sun, not to mention the editorial in The Globe and Mail — is a hardly a plan that will have an immediate impact on anyone.
Other pension experts have validated the labour plan for CPP expansion: Labour’s measured, gradual CPP contribution hike would kick in over seven years and would begin after a two year notice period that is legally mandated. Read about it at the CLC’s Retirement Security website.
The key point is that we could start on this now if we want. Will we let Jim Flaherty, Brad Wall and narrow lobby groups like CFIB stand in the way of a sensible plan that has great public, expert and stakeholder support?
Photo: flickr/Danielle Scott