Ottawa seeks public input on voluntary CPP expansion
July 13, 2015
By Bill Curry
The federal government is officially launching consultations on Canada Pension Plan reform just weeks before an election campaign that is expected to focus heavily on issues such as savings and taxation.
All Canadians are invited to submit their thoughts to the government by e-mail before Sept. 10. That timing means no government decision is likely to come before Canadians head to the polls on Oct. 19.
In launching the consultations, Finance Minister Joe Oliver made clear on Monday that the focus will be limited to voluntary options for Canadians to save more through the CPP.
“We believe in offering Canadians choice in retirement savings options. What we do not believe in are reckless tax hikes that would kill jobs at the very time when Canadians need more jobs, not less,” he said in a statement.
While the consultations will be managed by non-partisan public servants at Finance Canada, Mr. Oliver’s statement makes clear that they are being launched in the highly partisan context of a looming election.
Both the New Democratic Party and the Liberal Party favour mandatory increases in Canada Pension Plan premiums to pay for more generous CPP benefits in retirement.
Mr. Oliver surprised many in late May when he told the House of Commons the government would hold consultations on CPP reform. The idea had not been mentioned in Mr. Oliver’s April budget, and the Conservative government said clearly in 2010 that it consulted on the idea of a voluntary CPP expansion and rejected it as unworkable.
Mr. Oliver’s initial comments about holding consultations triggered feverish campaigning by interest groups on both sides of the CPP debate. The seniors’ advocacy group CARP has said polls of its members show overwhelming support for CPP expansion. Meanwhile, the Canadian Federation of Independent Business released an Ipsos-Reid poll on Monday that it commissioned showing most Canadians surveyed say they cannot afford to save more for retirement.
The CFIB supports voluntary options, but has warned that imposing mandatory new costs on business would hurt the economy.
The CPP system collects mandatory premiums from both employees and employers. Some economists have warned that a separate voluntary system could be costly to manage and would not be much different from existing voluntary options such as registered retirement savings plans.
Under the current rules, the maximum CPP benefit for those retiring at 65 is $12,780 a year. The average CPP benefit is $7,423.08 a year. Payments are based on a formula that assesses a person’s income over their lifetime.
The premium contribution rate is 9.9 per cent of earnings between a basic exemption of $3,500 and $53,600. The cost is split evenly between employees and employers, and the maximum annual contribution for each is $2,356.20. The self-employed must pay the full 9.9 per cent up to a maximum of $4,712.40.
A policy document released on Monday by Finance Canada points to Saskatchewan, Chile and the United Kingdom as examples that could inspire a new voluntary pension option in Canada.
While CPP pension contributions are managed by the Canada Pension Plan Investment Board, the government is asking for input as to whether the board or some other entity should manage individual accounts that would be created under a voluntary option.
Canadians are also being asked whether contributions to a voluntary CPP should be locked in until retirement or people should be allowed to transfer those funds to other savings accounts.