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Employers won’t be forced to match extra Pension Plan contributions
May 28, 2015
By Bill Curry

Employers will not be forced to match any extra voluntary payments made by workers under the Conservative government’s proposed Canada Pension Plan expansion.

Finance Minister Joe Oliver provided new details Thursday on the government’s surprise announcement that it will hold consultations on a voluntary expansion of the CPP.

“Clearly, one of the options is that an employer makes a similar contribution when their employee decides to make a contribution. It’s an option. But I insist that we will not create an obligation. That’s absolutely certain,” he said in French. “We will maintain the principle of choice and that applies to individuals and to companies.”

Mr. Oliver made the comments on a conference call with reporters from Dresden, Germany, where he is attending meetings of G7 finance ministers and central bankers. It was the first time he addressed the media since he announced the consultations on Tuesday during Question Period. The announcement has triggered a heated political debate on Parliament Hill, with all parties on the attack over the CPP even though none has released complete policy proposals.

Mr. Oliver also stated Thursday that the vast majority of Canadians are already saving enough for retirement, pointing to a survey released earlier this year by consulting firm McKinsey & Co. that found 83 per cent of Canadians polled said they are on track to maintain their existing standard of living in retirement.

But that view is at odds with labour groups and most provinces, which say Canada faces a broad problem due to declining savings rates and shrinking numbers of employers who offer defined benefit pension plans.

Policy experts have said it is hard to judge the merits of the Conservative government’s proposal for a voluntary, supplemental addition to the CPP because few details have been released as to how such a plan would work. Mr. Oliver indicated Thursday that the consultations with provinces, stakeholders and experts would be “comprehensive.”

The minister was also asked to respond to the fact that his predecessor Jim Flaherty stated in 2010 that after studying the very issue of a voluntary addition to the CPP, the government concluded it “would not work” and would be too expensive.

“Mr. Flaherty was concerned about the administration of a voluntary CPP. We now believe it is workable,” Mr. Oliver replied. “We believe it’s workable because we’ve analyzed it.”

Canadian Labour Congress president Hassan Yussuff disagrees, warning that extra complications will depart from the CPP’s strength as an efficient savings vehicle. He said the existing system works and the only problem is that the benefits are too low. The current maximum CPP pension is $12,780 a year.

“Other than ideology, there’s no argument as to why they can’t do this. They had agreed to it in 2010 only to have the Prime Minister tell Flaherty not to proceed,” he said. “I think this is more about the fact that public opinion polls are showing the government they’re in serious trouble with Canadians unless they can put something on the shelf as they enter the election.”

University of British Columbia economist Kevin Milligan, who has conducted research on retirement savings for Finance Canada and has also provided policy advice to the federal Liberals, said Mr. Oliver’s comments do provide additional clarity as to the government’s plans.

Dr. Milligan said ruling out a requirement that employers match employees’ additional contributions would likely require the CPP Investment Board to create a new system of individual accounts that would be managed in a similar way to mutual funds.

“When you strip away everything and just make it a mutual fund provider, I’m not sure the CPPIB has any advantage over the private sector,” he said.