Tories rejected idea of Pension Plan expansion five years ago

Theglobeandmail.com
May 27, 2015
By Bill Curry

The Conservative government rejected the idea of a voluntary expansion of the Canada Pension Plan five years ago as overly expensive and misguided, a history that is raising questions as to why it is now proposing that very idea.

Federal Finance Minister Joe Oliver shocked many this week by announcing the government would be launching consultations this summer with experts and stakeholders on the idea of supplemental, voluntary additions to the Canada Pension Plan.

While Mr. Oliver and his department provided few details, the idea would be that Canadians could choose to pay higher CPP premiums in exchange for larger CPP payments in retirement.

The call for consultations is in spite of the fact that Finance Canada held detailed talks and contracted policy experts throughout 2009 and 2010 to weigh in on the state of retirement saving in Canada.

After the study, then-finance minister Jim Flaherty said it was clear that “some sort of voluntary new CPP method” wouldn’t work.

“This was rejected unanimously by our partners in the federation when we met and discussed the issue because it would not work and because the CPP would be unable to administer it,” he told the House of Commons in September 2010.

Ted Menzies, who was then the Conservative minister responsible for the pensions file, went further.

“The verdict was unanimous. This was not a good idea,” Mr. Menzies told the House in November 2010.

“The consensus of governments and public-interest groups from across the political spectrum has been that this would be costly, ineffective and, ultimately, a misguided solution.”

Pension expert Keith Ambachtsheer, director of the University of Toronto’s Rotman International Centre for Pension Management, said whether or not such a plan is a good idea depends on the details.

“That’s politics,” he said. “How can it be such a terrible idea five or six years ago and now it’s sort of a good idea?”

Mr. Ambachtsheer said Prime Minister Stephen Harper has long taken the view that all pension options should be voluntary. He said he hopes Canada eventually follows the lead of Britain, where workers are automatically enrolled to make the higher pension contributions with the choice to opt out. He said the vast majority chose to stay in the program.

“There’s this beautiful middle way,” he said.

Mr. Harper defended his approach Wednesday as he was peppered with opposition questions.
“Yes we will provide [seniors] with more options,” he said. “What we will not do - what the NDP and Liberals want to do - is tax Canadian seniors and tax Canadian workers and that is not what they are looking for.”

University of Calgary tax expert Jack Mintz, who led the retirement research project for Finance Canada and produced a summary report in December 2009, agreed that details such as whether specific benefits are guaranteed or not make a huge difference on whether such an idea has policy merit. Dr. Mintz said it would likely be more costly for the CPP Investment Board to track individual accounts and there would be issues in terms of how contributions and withdrawals are treated for tax purposes.

“The question is what are we talking about?” he said. “I think [the consultations] might be partly to get this off the table for the next election.”

Mr. Oliver’s announcement did trigger swift political reaction from the NDP and the Liberals, who have been calling on Ottawa to work with the provinces on a mandatory expansion of the CPP.

“I think that you have to look at the last 9 1/2 years of behaviour of the Conservatives to know that this is a last-minute political attempt to convert from a long-held position,” said NDP leader Thomas Mulcair. “The Conservatives have no real intention of doing anything about increasing the Canada Pension Plan.”

Liberal leader Justin Trudeau said the Conservative proposal is “patently insincere.” He also said that while his party previously campaigned on a call for a voluntary supplemental expansion of the CPP, his party now says a mandatory expansion is required.

“In conversations with the provinces, and reflection, we’ve realized that we actually need a proper expansion of the CPP,” he said. “We’re looking at an expansion and a mandatory expansion of the CPP of the type that Kathleen Wynne put forward in Ontario.”