Breakthrough on pensions?
Published On Wed Jun 16 2010
When last they met in the Yukon, beset by mid-winter gloom in the frigid Arctic air, Canada’s finance ministers were clinging to outdated notions that all was well with the retirement income plans of working Canadians.
What a change after six months — and a chorus of criticism from Canadians who demanded straight talk on pensions instead of a snail’s pace on reforms.
Reunited in Prince Edward Island this week, the politicians did a dramatic about-face and emerged with a consensus for a beefed-up Canada Pension Plan. Ontario’s Dwight Duncan took the lead by calling for an expanded, mandatory CPP — rather than taking the path of least resistance with merely voluntary schemes that would benefit only workers with the means to pay more.
The financial industry has lobbied fiercely for solely voluntary savings plans, but that would be a cop-out — and a costly one at that. Management fees charged for private plans are exorbitant compared to the CPP, and the take-up by Canadians is too low to head off a looming shortfall in retirement income.
Prodded by Ontario, federal Finance Minister Jim Flaherty finally agreed to play a necessary pan-Canadian leadership role, after initially adopting a hands-off approach on pension and then insisting on moving slowly so as to “do no harm.” That sounded suspiciously like “do nothing.”
Flaherty has long boasted about the CPP’s firm financial footing, but that’s largely because its payouts are so weak–a maximum of about $11,000 a year. Now, he has signalled he will move gradually with “modest,” phased-in hikes. But how modest and how gradually?
Ottawa and Ontario are keenly aware that moving too fast could bog down the whole enterprise. Changes to the CPP and sister Quebec Pension Plan require support from seven provinces with at least two-thirds of the population, and Alberta is already dissenting.
This may be only half a loaf, but it’s progress. And a promising sign that governments at all levels are answering the call from working Canadians for a serious dialogue — and action — on pension reform.
< http://www.thestar.com/opinion/editorials/article/823989–breakthrough-on-pensions >