Tag Archives: CPP

Pension blue skies ahead?


If the measure of a politician’s skill is how well she handles the hot potatoes of public policy, then Cathy Rogers must have acquired a good pair of oven mitts before she stepped into her new job as New Brunswick’s finance minister earlier this month.

Arguably, only a few issues are hotter in this country than pension reform. And she knows it, which is likely why she’s been at great pains to explain the reasoning behind her decision to endorse a scheme that increases premiums into the Canada Pension Plan.

The move, signed off by federal, provincial and territorial finance ministers last week, is already generating the predictable amount of sturm und drang within New Brunswick’s business community. “I’m not very happy about it,” Joel Richardson, vice-president of the New Brunswick branch of Canadian Manufacturers and Exporters, told the Telegraph-Journal last week, “and neither is anybody else in this province.”

He added: “No one has been consulted by either federal or provincial government. This is an absolute failure on behalf of this government and the federal government to work together with the business community to be able to develop and consult on a major, far-reaching policy that will have short and long-term economic impact on the province.”

Business’s basic beef with the CPP hike is that it boosts the payroll taxes that come off their bottom lines. That places undue pressure on their operating margins at a time, they argue, when the nation and few provinces can afford to hobble the private sector’s competitiveness.

Although, dig a little deeper, and it becomes clear that the criticism is not merely situational; few businesses like payroll taxes on principle, regardless of how well they and the broader economy happen to be performing. As Canadian Chamber of Commerce President Perrin Beatty effused last week, “We strongly support any program that will allow Canadians to save toward their retirement – as long as it is done on their own terms.” (That’s another way of saying, ‘get your hands out of my members’ pockets’).

Still, the hike, itself, is fairly minor, and, as Ms. Rogers pointed out in an interview with the T-J, it could have been much worse. “To be honest with you, when I first looked at the options on the table, I was very discouraged in the beginning,” she said. “I was thinking, ‘No, in New Brunswick, we’re not going to handle this.’ But we came a long way from some of the initial proposals. I wanted to make sure we could mitigate any negative impact on the economy, on business and on individuals.”

That suggests the New Brunswick’s new finance minister may have played a central role in delaying the CPP hike rollout till 2019 and its subsequent phase-in over seven years. What’s more, under the new framework, employer and employee contributions rise by one per cent. Said Ms. Rogers: “I never want to have this presented as an aggressive enhancement. It’s very modest.”

Modest or not, it won’t stop the complaints from pouring in. Neither will it address the fundamental, structural inequities in income and wealth distribution in Canada and much of the developed world. That statistics are as clear as they are compelling: The rich really are getting richer; the poor really are getting poorer. It’s doubtful that any enhancement to the CPP would effectively address that modern conundrum.

Still, on one of Ms. Rogers’ first times at bat since becoming this province’s finance minister, she’s proving that she can handle the fastballs and even the odd hot potato of public policy.

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Sweetening the CPP is long overdue


It’s always disheartening, though lamentably predictable, when politicians, who ought to know better, adopt the talking points of a vested interest to justify the clearly unjustifiable.

So, when Canada’s Finance Minister Jim Flaherty says that “now is not the time for CPP payroll tax increases”, as he did earlier this month following a meeting with his provincial counterparts in Meech Lake, P.Q., he is merely lifting a line from the Canadian Federation of Independent Business (CFIB) playbook, to wit:

“CPP/QPP increases would mean a significant premium hike for working Canadians and even more serious impacts for the economy. . .Higher labour costs, with no increase in productivity, would lead to job losses or reduced hours for many workers over the first ten years of a CPP increase, and wages would go down by 1.5 per cent. Many Canadians would go without work for years. Some might escape unscathed, but everyone would be at risk.”

This dire warning appears on the organization’s web site, where “research” clearly indicates that most Canadians don’t want to pay higher premiums because, simply, they can’t afford the ones they are facing right now.

Instead, an Angus Reid Global survey says “they believe that government should control spending and reduce taxes to allow more savings. Moreover, many feel that new incentives and voluntary measures to save through existing and new retirement savings tools including the CPP/QPP are the next most effective solutions. Immediate CPP/QPP mandatory increases impose adverse effects: about half of working Canadians express that such increases would reduce their ability to spend on essential goods and services such as food and housing while close to three in four business owners would face increased pressure to freeze or cut workers’ salaries.”

I am not prepared to concede that “most Canadians” actually feel this way, but even if they do, this doesn’t mean that they are right.

As a Globe and Mail editorial, entitled “Flaherty to savers: You’re on your own with CPP as it stands”, admirably pointed out a couple of weeks ago, “The CPP is not a welfare program, or an income-redistribution program. It’s not paid for by taxes. It’s a defined-benefit pension plan, and how much you get out of the program is based on how much you put in. It’s actuarially sound, independently run and low-cost. It’s one of the world’s best-run retirement safety nets. But the maximum pension for a lifetime of contributions is just $12,000.”

Clearly, that is not enough for most working Canadians. By “most”, I am not referring to the rich or lucky few who stand to pull one of those gilded public pensions that assorted bargaining units have been loathe to see watered down.

Nor am I talking about the impoverished, who must subsist on various forms state-supplied handouts and subsidies.

I am looking straight into the worried eyes of those who populate the once sturdy middle class in this country.

The sad fact is Canadians with steady incomes don’t save enough for their retirements. They haven’t in some time. Pundits of quasi-Libertarian bent and their right-wing fellow travelers in political office adoring placing the blame for this conditions squarely at the feet of the non-savers. They’re spendthrifts or layabouts or, simply, poorly advised about their options .

The truth, however, is complex, involving many factors that are out of an individual’s control, not the least of which was the disastrous implosion of financial markets a few years back – a calamity that destroyed trillions of dollars in personal assets, including those held in retirement portfolios, all over the world.

Nothing, of course, will rebuild these funds. But even a small expansion of the CPP – which is a far less risky savings instrument than just about every other option –  will buffer the financial shock of a lower living standard in retirement.

What’s more, it will cost far less now to sweeten the CPP than it will to prop up droves of aging Canadians who will fall into poverty and endure all of its associated evils: ill health, hunger homelessness.

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