Canada Pension Plan boost would be far from free

Posted on May 30, 2013 in Social Security Debates – opnion/commentary – The public sector unions and provincial politicians pushing for a CPP hike too often ignore the hefty potential costs.
May 29 2013.   By: Dan Kelly

Think back. When have you ever actually received something for nothing?

Yet this is exactly how public sector unions and some provincial politicians have been presenting the latest proposals to increase benefits under the Canada and Quebec pension plans (CPP and QPP). All the gain, and none of the pain.

So let’s set the record straight. If we, as a nation, want to have greater benefits in retirement, there will be costs involved. Before we make any decisions, we all need to clearly understand who pays, how much and who benefits.

Although Canada’s pension system ranks among the best in the world, with senior poverty rates currently third-lowest among OECD countries, many Canadians are concerned about their future well-being, and that of their children. Most Canadians would like to ensure a more secure retirement for tomorrow’s seniors, and that is a noble goal. The question is, how do we get there?

Millions of working Canadians do not have access to a pension plan through their place of work, and that is why CFIB has been pushing provincial governments to move forward with legislation to enable pooled registered pension plans (PRPPs). These low-cost, easy-to-manage plans would make retirement savings accessible to more Canadians than ever before, while not imposing new obligations on employers or employees who cannot afford a hike in mandatory taxes or fees.

What others are proposing, and what we definitely don’t need right now, is an expansion of the CPP and QPP. Unions are calling for a doubling of CPP benefits, while governments have reviewed a more modest proposal (the so-called 10-10-10 model). Even the more gradual increase in CPP benefit rates and the maximum contribution would have some significant impacts:

•Up to $1,100/year more in CPP premiums for working Canadians, handing even more of their hard-earned money over to the government;

•Up to $1,100/year per employee more in CPP premiums for businesses, putting additional strain on companies hit hard by the economic downturn;

•Job losses and reduced work hours in the short term as companies struggle to deal with the additional costs (700,000 work years lost in total);

•Ultimately leading to a 1.5 per cent reduction in average wages as laid-off workers are reabsorbed into the workforce;

•Full retirement benefits only available after 40 years; and

•No increased benefits for Canadians that are already retired.

Interestingly, the push for a CPP hike is being led by public sector unions and some provincial governments. It is clear to us that unions are pushing CPP expansion as a way to mask an even bigger pension challenge: dramatically underfunded and overly generous pensions for civil servants. Unions are suggesting that their gold-plated pensions aren’t the problem, that the issue is small business owners too cheap to do the right thing and provide workplace pensions. Ken Georgetti of the Canadian Labour Congress even suggested that small business owners don’t pay enough taxes to even warrant a say over this issue.

So before provincial finance ministers sign us all up for a decade of smaller paycheques each January 1, shouldn’t we have a chat about the potential costs? I believe if we do, Canadians won’t go for yet another hit in their pocketbooks, especially one that hurts the economy, and costs jobs. In fact, in one short month, CFIB has gotten more than 7,000 signatures on a petition calling on government to say no to any CPP or QPP hike.

Something for nothing is a nice sales pitch, but Canadians just aren’t buying.

Dan Kelly is President and CEO of the Canadian Federation of Independent Business (CFIB), which represents 109,000 small and medium-sized businesses across Canada.

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