Is this the year for CPP reform? Talks heat up as ministers prepare for meeting - InfoNews

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Is this the year for CPP reform? Talks heat up as ministers prepare for meeting

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June 18, 2016 - 4:30 PM

OTTAWA - The stars may finally align for an expansion to the Canada Pension Plan as national talks on its future are expected to intensify over the coming days.

On Monday, federal, provincial and territorial finance ministers will continue their often-polarizing discussions whether the program needs a boost to help Canadian retirees several decades from now.

The debate will also explore whether it's the right moment to start the process that would gradually upgrade the public pension plan.

The dedicated and vocal effort in favour CPP reform has been led by federal Finance Minister Bill Morneau and the government of Ontario, which has considerable leverage at the table as Canada's most-populous province.

Ahead of the meeting in Vancouver, there are expectations some sort of agreement — perhaps tentative — can be reached.

A change to the CPP would need the consent of Ottawa and a minimum of seven provinces representing at least two-thirds of the country's population. Many believe the cause could find enough support from the ministers.

There hasn't been such a level of consensus on CPP reform at a national scale since the 1990s.

"Historically, it would be a big deal," Keith Ambachtsheer, an expert on pensions, said of any agreement in Vancouver or even the ministers assemble again in December.

"But on the other hand, I think the other question is: to what degree do things have to be watered down in order to reach consensus?"

Ambachtsheer, director emeritus of the International Centre for Pension Management at the University of Toronto's Rotman School of Management, said the majority of Canadian retirees are in decent financial shape.

But he added that amid concerns that fewer employees have adequate workplace pensions, some predict people retiring in 30 or 40 years could face a tougher situation.

That means the focus of starting CPP enhancement now is on the long game. Today's retirees, and even those entering retirement in the coming years, wouldn't see benefits from a CPP enhancement, he said.

"There's going to be no immediate goodies for anybody in this," Ambachtsheer said.

"It's a tough debate because it isn't about a crisis that's here and now."

Those who argue against CPP reform are often as outspoken as those who call for it.

Critics warn how expanding the CPP would mean squeezing additional contributions from workers and employers.

Others have questioned the timing of such a move, saying pockets of the Canadian economy are still too fragile.

Even provincial finance ministers have publicly questioned the need for CPP reform at this time.

Conservative finance critic Lisa Raitt recently said Ottawa hadn't provided evidence to show that there would be widespread benefits from an expanded CPP, nor had it explained the reason to get a deal done now.

The president of the Canadian Federation of Independent Business, who has lobbied finance ministers across the country to block CPP reform, said in fairness the federal Liberals won a majority mandate after campaigning on the issue.

"But I suspect that people haven't really woken up to what ... this is likely to do to their paycheque and to their job," Dan Kelly said.

CPP expansion would "scorch the economy and a whole bunch of Canadians with it."

He acknowledged there are people who are not saving enough for retirement, but he added that some studies show more than 80 per cent of Canadians are in comfortable shape. Those people would be forced unnecessarily to save more, Kelly said.

He also believes this is the closest the country has been to CPP reform in a long time.

"I think this is going down to the wire," said Kelly, whose organization represents 109,000 small business owners.

The federal Liberals' election victory last fall created a major shift in the dynamic. In recent years, their Conservative predecessors had opposed a mandatory CPP enrichment.

Kevin Milligan, a University of British Columbia economics professor, said a closer look at the numbers makes a good case for a modest CPP reform — one that targets middle-income earners.

Milligan said the 30 to 40 per cent of people who lack an employer-based pension plan are at risk of falling into problems in retirement.

He said people in the lower-income brackets receive help from the Guaranteed Income Supplement and Old Age Security, while those with higher incomes during their working years have usually stashed enough money for their golden years.

Milligan added there is indeed a potential concern over the timing of CPP enhancement because payroll contributions would go up. As those fees rise, some worry it will cut into workers' wages.

However, he said the CPP legislation states that any agreed-upon CPP reforms can only be implemented three years after a federal-provincial agreement is reached.

That means if ministers ink a deal this year, the earliest the changes could begin would be Jan. 1, 2019, Milligan said.

He added that a lot can change in the various provincial economies over three years.

"It's about the future."

Follow @AndyBlatchford on Twitter

News from © The Canadian Press, 2016
The Canadian Press

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