OTTAWA – Advocates for enhancing the Canada Pension Plan say they are approaching the consensus required to press ahead with reform that would see both premiums and benefits rise in the future.
Expansion of the pension plan will be the No. 1 item under consideration at the annual end-of-year meetings of federal and provincial finance ministers, which take place Sunday and Monday in Ottawa, and some see momentum building for an agreement in principle.
Pressure has been growing since Prince Edward Island’s Wes Sheridan released his modest proposal in early October to nearly double contributions over three years, resulting in a near-doubling of maximum annual benefits to $23,400 from the current $12,150.
While no plan is likely to win approval Monday, Sheridan believes that ministers will be able to agree on a statement in principle that the pension plan must be enhanced, with the details to be hammered out later, possibly as soon as next summer.
“All of us want to do what’s right for Canadians, we just have to find a middle ground to make sure there’s a compromise where we can bring forward an enhancement that is modest and fully funded, and I think we will do that on Monday,” Sheridan said in an interview.
“What we need to come out Monday is that we all say, ‘Yes, CPP enhancement must be part of the overall retirement system in Canada.”
Sheridan admits that he does not have as yet all the necessary provincial support — seven out of 10 provinces representing at least two-thirds of the population — with hold-outs including Alberta, British Columbia and New Brunswick.
Finance Minister Jim Flaherty has also been cagey about his position.
Flaherty has said enhancement is not a bad idea, adding that the economy has to be able to afford it “at the appropriate time.” Kevin Sorenson, the minister of state for finance, has been much more unequivocal: raising premiums would “take more money out of the pockets of employees and force employers to cut jobs, hours and wages,” he wrote in a recent newspaper column.
The federal ministers have often cited the Canadian Federation of Independent Business for their claims that enhancement would kill jobs, although advocates say the alarms are unjustified. They point out there was little evidence of Canadians losing jobs the last time pension premiums were raised in the 1990s.
Aside from P.E.I., the most vocal advocate for pension reform is Ontario. Finance Minister Charles Sousa has introduced a motion in the provincial legislature that warns the province would seek to go it alone if Ottawa does not lead the way.
The motion, which says “Ontario should pursue its own solution to enhancing retirement security should the federal government not respond in a timely fashion,” resembles one debated Monday in the House of Commons.
The Ottawa and Ontario resolutions are likely meant more to apply pressure and to flush out party positions on the issue than achieve results, since no one level of government or jurisdiction can act alone.
But Susan Eng of the Canadian Association of Retired Persons said she believes the chances of some agreement on enhancement have improved since the last time it was on the agenda in 2010. At that time, it was considered too soon after the 2008-09 recession, so the ministers opted for a voluntary program called the pooled registered pension plan, which has met with sporadic support.
Eng is not above applying pressure herself. On Sunday, the organization released results of a survey of over 2,000 members showing that 71 per cent “do not believe the current government deserves power if it does not expand CPP.”
The survey also found that more CARP members support the Liberals than the Conservatives by a margin of 43 per cent to 31 per cent.
The results are not “a whim,” Eng said. Her members have been polled repeatedly on the issue, she said, and have consistently supported reform even though they know they won’t personally gain from higher benefits, since the payout will be for future generations.
“People understand there is a necessity for it,” she said, pointing out that more and more of today’s workers have no company pension plan.
Sheridan agreed, saying that Canada’s workforce is increasingly either self-employed, on contract or part-time, meaning they do not have access to company pensions.
Alberta Finance Minister Doug Horner, regarded as the biggest roadblock to enhancement, said he is open to looking at all the options, but remains a skeptic.
“I’ve had several businesses who have told me what the impact would be and it’s significant, it’s not something we should take without due caution and attention,” Horner said.
“While we’re open to discussion, we don’t want to do something that impairs the ability of employers to employ people.”
One possible compromise, he said, would be a supplementary CPP plan in which employees can voluntarily increase their contributions, which would be automatically withdrawn from their paycheques.
Another is that contributions would only start being raised once certain economic “triggers” — such as a bar for employment levels and economic growth — are met.
That would be acceptable to Eng, who noted any change in premiums would not take effect for three years, after which hikes can be phased in over a longer period. That should give the economy plenty of time to recover fully from the recession and employers to adjust, she said.