After a meeting with provincial finance ministers this week, the federal government has turned down expansion of the Canada Pension Plan – prompting Ontario to forge ahead alone.
During the meeting in Meech Lake, Que., finance minister Jim Flaherty said expansion of the CPP in the current volatile economic climate would not make sense.
Provincial finance ministers decried the decision, calling it a stall tactic. Charles Sousa, Ontario’s finance minister, said the province will start to look at its own retirement savings program.
“An enhancement to the CPP is critical to ensuring that Ontarians and Canadians, particularly today’s middle-income earners, have greater financial security in retirement,” Sousa said. “We will move forward to implement a made-in-Ontario alternative to protect Ontario workers in their retirement. Doing nothing is not a solution to this problem and will not give Ontarians the security they need to retire. We have to act and that’s what Ontario will do.”
Other provinces echoed disappointment with the federal government’s decision, signalling the possibility of other provincial pension plans.
Paul Moist, national president of the Canadian Union of Public Employees (CUPE) denounced the current CPP rubric as ineffective. By slowly increasing contribution rates to 2.85 per cent over seven years, as much as half of pre-retirement income could come from CPP benefits, up from the current 25 per cent.
“Delaying CPP expansion to keep propping up the failed experiments in voluntary private savings does nothing to solve the pension crisis,” Moist said. “We need to build on the success of the CPP. It is the most efficient, effective and affordable way for as many Canadians as possible to secure a decent retirement income.”
Earlier this month, minister of state for finance, Kevin Sorenson, said the economy would take a hit should CPP enhancement go ahead.
“In fact, families and the Canadian economy cannot afford a dramatic expansion to the CPP that will take more money out of the pockets of employees and force employers to cut jobs, hours and wages,” Sorenson said, adding that one provincial proposal could kill up to 50,000 jobs. “Other proposals to expand CPP payroll taxes, while more modest, would also harm Canada’s fragile economy. Any benefit these proposals could have years or decades down the road must be studied and weighed against the immediate economic damage caused to families, businesses and communities. We all want a stronger retirement system. However, we must not make changes that could have negative effects on our fragile economy.”
Details for Ontario's potential pension plan have yet to be released.
© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.