Ontario pension plan will launch in 2017 regardless of CPP changes, Kathleen Wynne says

Ontario’s controversial new mandatory retirement savings scheme - set to launch next Jan. 1 - is coming regardless of whether the existing Canada Pension Plan is enhanced, says Premier Kathleen Wynne.

Thestar.com
Jan. 4, 2016
By Robert Benzie

Ontario’s controversial new mandatory retirement savings scheme - set to launch next Jan. 1 - is coming regardless of whether the existing Canada Pension Plan is enhanced, says Premier Kathleen Wynne.

Wynne devised the Ontario Retirement Pension Plan after former prime minister Stephen Harper opposed bolstering the nationwide CPP, which will pay out a maximum benefit of $13,110 this year.

Since the ORPP was first announced in 2014, Prime Minister Justin Trudeau has promised to work with the provincial and territorial premiers to improve CPP benefits for retirees.

But federal Finance Minister Bill Morneau said after a meeting with his provincial counterparts before Christmas that there’s more work to be done before the CPP can be strengthened.

“We have a range of things under consideration from doing nothing, because of the economy, to more significant changes,” Morneau said Dec. 21. The minister is a pension expert who advised Wynne on the Ontario plan before he entered politics.

Mindful that Saskatchewan and British Columbia oppose enhancement due to economic concerns, the treasurer stressed “the appropriate first step (is) to begin consultations on a range of options with Canadians.”

To that end, Canada’s finance ministers will convene in June and again next December to determine their next moves on the CPP.

That means Ontario has little choice but to move forward with its own parallel plan.

“We’re ... not going to stop implementing the ORPP, because we cannot guarantee what the outcome will be,” Wynne told the Star in an interview three weeks ago.

While the premier emphasized Queen’s Park is “very open to working with the other provinces and with the federal government” retirement security is too important to not be on the front-burner.

“The enhancement to CPP - whatever enhancement to CPP is put on the table - has to be as good what we’re proposing for ORPP,” said Wynne.

“It has to solve the problems that we’ve identified, which (include the) adequacy of the benefit, and target the people who don’t have workplace pension plans, because those are the problems we’ve identified,” she said.

Starting next year, workers at companies with 500 employees or more that do not have registered workplace pension plans will be forced to earmark 0.8 per cent of their pay toward an ORPP contribution.

That percentage, which must be matched by employers, will eventually rise to 1.9 per cent in 2020.

It will be capped at a combined 3.8 per cent of an employee’s annual salary of up to $90,000. (By comparison, CPP contributions were made on up to $54,900 of earnings last year.)

Those working at companies employing between 50 and 499 will begin their phase-in in 2018 with all smaller firms will be affected by 2019.

Although federal laws do not currently allow self-employed Canadians to have registered pension plans, the Ministry of Finance will “explore options to enable the participation ... in the ORPP” of Ontarians who work for themselves.

Last month, the Conference Board of Canada warned the plan “is expected to eventually reduce the disposable income of approximately 3.4 million Ontario employees, which could hinder household consumption growth over the near term.”

At the same time, business groups who view pensions as deferred compensation fear their bottom line will suffer as a result of the scheme.

But with two-thirds of Ontarians not having any workplace pension plan, Wynne said enriching retirement benefits is essential.

“This is not just an Ontario problem,” she said. “It’s a national problem.”