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Tories propose voluntary expansion of Canada Pension Plan
May 27, 2015
By Bill Curry and Steven Chase

The Conservative government is proposing a voluntary expansion of the Canada Pension Plan in an about-face that critics say is aimed at wooing voters months before a federal election.

The announcement marks a significant shift for the Conservatives, who have long dismissed calls for CPP expansion by claiming higher premiums represented job-killing payroll taxes.

The move was praised as a step in the right direction from those who warn Canadians aren’t saving enough for retirement. But it was immediately dismissed by Ontario, Canada’s most populous province, which is planning to launch a pension plan of its own because of perceived inaction from Ottawa.

Finance Minister Joe Oliver made the announcement Tuesday during Question Period. He promised consultations will take place over the summer on the details. He did not answer questions and no further details were provided by Finance Canada.

The general premise is that Canadians who choose to pay higher CPP premiums would receive higher payments in retirement.

Proponents of expanding the CPP argue it has a solid investment record and can provide better returns because it does not operate for profit. A voluntary CPP could represent a new low-cost competitor for existing private-sector funds.

The announcement was not mentioned in the budget and, in effect, represents a campaign commitment for the Oct. 19 election.

It contrasts with the NDP and the Liberal support for mandatory increases in contributions to finance enhanced benefits. It also underscores the importance of retirement savings as an election issue this fall, as all three main parties have already signalled large parts of their policy plans in this area.

“Coming from the party that has opposed this vigorously and vehemently ... it does come as a bit of a shock,” said Rob Brown, past-president of the Canadian Institute of Actuaries. Mr. Brown said he believes younger generations are not saving enough for retirement and a voluntary increase to the CPP should help.

Mr. Brown noted that the lack of detail appears designed to support Prime Minister Stephen Harper politically.

“What has Harper actually promised? He’s promised a consultation,” he said. “It’s one of these wonderful things that can be whatever you want it to be until after the election.”

Ottawa has been at loggerheads with the opposition parties - and most provinces - for years over the issue. Labour groups and the seniors advocacy group CARP have long argued that voluntary savings vehicles don’t work and that a mandatory CPP expansion is needed to ensure all Canadians are saving enough for retirement.

The Tories sided with business groups, including the Canadian Federation of Independent Business, that argue increasing mandatory contributions to the CPP by employees and employers would damage the economy.

The CFIB said Tuesday it was “delighted” by Mr. Oliver’s proposal, provided that it would also be voluntary for employers to make larger contributions for employees. Susan Eng, the vice-president of CARP, also responded positively, though stressed that mandatory increases are still likely to be needed.

Ontario’s associate finance minister Mitzie Hunter described the federal proposal as “disappointing,” in a statement Tuesday. “Two things are clear - people are not saving enough for retirement, and we don’t have a federal partner willing to tackle this problem,” she said.

The Conservative Finance Minister contrasted his proposal with the NDP and Liberals, suggesting the Tories give Canadians more choice.

However, Liberal finance critic Scott Brison noted it was the Liberals who campaigned on both a mandatory and a voluntary expansion of the CPP in the 2011 election.

Any change to the CPP requires the support of Ottawa as well as two-thirds of the provinces representing two-thirds of the population.

NDP finance critic Nathan Cullen called the move a “deathbed conversion” from the Conservatives.

“You can tell when the government’s serious about something: They ram it through an omnibus bill. When they’re not serious about it, they launch a series of consultations,” he said.