CPP? Maybe. ORPP? For sure

What many people want is a bigger and better CPP. What we’re going to get in the next year is Ontario’s provincial retirement plan.

Thestar.com
Dec. 2, 2015
By Adam Mayers

They asked for a show of hands at a pension conference that wrapped up Wednesday.

Who was in favour of expanding the Canada Pension Plan? More than half the audience of 100-plus people raised an arm.

The next question: How many supported the Ontario Retirement Pension Plan (ORPP), to be launched in 13 months. Ten or so arms went up, and some of those who said yes didn’t seem quite sure.

That pretty much sums things up. What many people want is more CPP. What we’re going to get is the Ontario plan.

If an improved CPP comes at all, it will be way in the future after long negotiations, and it won’t be completely in place until 40 years from the day you start paying more. That’s because the CPP Investment Board is required to be fully funded before it can pay anything extra. The increase in payments will be a little at a time. So stop dreaming about a fatter cheque soon. For your kids, maybe.

The ORPP will work under the same fully funded concept, and is aimed at the two-thirds of working Ontarians who lack a company pension plan. Mitzie Hunter, the associate finance minister in charge of the plan, said the numbers are worse than two-thirds for younger workers: only one in four have any pension coverage.

If your company has a defined benefit or defined contribution plan, you’re excluded from the Ontario scheme. If you work for a federally regulated company such as a bank, you’re also excluded.

The group that remains will pay 1.9 per cent of annual earnings up to $90,000, matched by their employer. They’ll start getting a little by 2022, with the maximum to be paid out 40 years on. The benefit would top out at 15 per cent of income, or $9,000 a year, at the $90,000 level. That would be in addition to the CPP.

But it’s likely the Canadian plan, not Ontario’s, will get the headlines as federal finance minister Bill Morneau gets going on the federal plan.

The good news is that the former CEO of benefits consultant Morneau Shepell is uniquely positioned to have context on both. His company advises large employers on how to design and manage pension plans. Ontario Premier Kathleen Wynne called on him to help shape the ORPP framework. He can see all the pieces.

“Finance ministers focus on what they know and he knows pensions,” Susan Nickerson, a pension lawyer with Torys LLP, told the conference sponsored by University of Toronto’s Centre for Industrial Relations and specialty publisher Lancaster House.

The rub, though, is that any changes to the CPP require a national consensus, which is defined as agreement by two-thirds of the provinces with two-thirds of the population.

But first you have to define what you mean by expansion. More for everyone? More for some of us?

“I don’t need more CPP, I have a great pension,” Carleton University business professor Ian Lee said.

And more fundamentally, is there a reason to do it? Morneau co-authored The Real Retirement with Morneau Shepell chief actuary Fred Vettese, which argues there is no universal pension crisis.

Pension consultant Bob Baldwin, who has worked for the Canadian Labour Congress, said studies purporting to look at the same thing often measure different populations. So the conclusions about who needs help can be contradictory.

Baldwin expects CPP talks to resume, that progress will be slow and that expansion is by no means assured. Alberta may be interested now, but not Quebec, which manages its own CPP and where citizens already pay higher premiums because they have a smaller population supporting their plan. “They won’t be that keen to go ahead,” Baldwin said.

Carlton professor Lee adds Manitoba and Saskatchewan to the not-that-interested list. He, too, predicts that talks will go on and not get very far very quickly. He also doesn’t think CPP expansion is needed and that the ORPP is a bad idea.

Hunter said there’s been a sea change in Ottawa in terms of attitude. As Ontario advances its plan, it is working closely with the federal department of finance to make sure the administrations could be easily integrated.

That would be Ontario’s best outcome: a plan that is eventually folded into something larger.

“We’re open to a national scheme, but the prime minister can’t do it alone,” Hunter said. “He has to work with the provinces. In the meantime, we will move ahead with the ORPP.”