Pensions need reform, not more bickering

Posted on December 20, 2010 in Social Security Delivery System

Source: — Authors: – news/opinions/editorials
Published Sunday, Dec. 19, 2010. Last updated Monday, Dec. 20, 2010

Provincial financial ministers meeting in Kananaskis, Alta. Monday are girding themselves to reject the federal government’s latest pension proposals. Instead of holding out for an enhanced Canada Pension Plan at all costs, they should make constructive suggestions so that the federal structure will be well-governed and include the greatest number of new participants – the principles that ought, after all, to most animate discussions of retirement security.

There are good reasons to support a supplement to the CPP, as a number of provinces want: The CPP is established and so can be easily modified to include an additional group of participants; it is run at low cost.

But if participation in a supplementary CPP is voluntary, new enrolment may be slow. And the brunt of the burden of the payroll tax increase needed to create a supplementary CPP would be paid by working Canadians with low and moderate incomes.

The federal proposal for Pooled Registered Pension Plans, meanwhile, would create new, privately administered plans for almost half the work force (eight million Canadians), many of whom are self-employed, who have neither an RRSP nor an employer-backed plan.

In other words, a larger CPP is attractive for the CPP, but the federal idea of pooled plans will, by being run through employers who can easily connect with their staff, likely create more actual savers.

But the proposal for pooled plans is not perfect. It should include an option for self-employed Canadians to easily join through their tax returns. At participating employers, enrolment should be automatic, requiring those who do not wish to participate to explicitly opt out. Provinces should make participation mandatory for employers over a certain size and for smaller companies where a large proportion of employees express an interest. And in the interests of competition and security, it should be made clear that several companies will administer the pooled plans.

The pension debate has illustrated two truisms in Canadian public life: Provincial and federal governments bicker; Canadians never save enough for retirement. With an improved pooled plan proposal, more Canadians could have governments agreeing to help them, with a forceful hand, save more.

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