Liberal Leader Michael Ignatieff is promising a "secure retirement option" aimed at encouraging Canadians to save more. The voluntary plan would be similar to private-sector RRSPs, except that the investments would be managed by a Crown corporation - the Canada Pension Plan Investment Board. Liberals say this would reduce costs for Canadians. In addition, Liberals are promising they would gradually raise mandatory premiums and guaranteed benefits to the existing Canada Pension Plan. Finally, Mr. Ignatieff says a Liberal government would help low-income seniors by adding $700-million a year to the Guaranteed Income Supplement.
Calling it a secure retirement option could leave Canadians with the false impression that their savings are, well, secure. That wouldn't be the case. Under the plan, the retirement funds of Canadians would be invested to "maximize returns without undue risk of loss." That means at least some exposure to the stock market, which recent events have shown can go down significantly. University of Calgary pension expert Jack Mintz said that's the very reason federal and provincial finance ministers rejected the idea of a supplemental CPP plan last year.
"There could be political pressure [for governments]to put in billions of dollars of support if there was a [market]loss like in 2008-2009," he said. "The whole idea has been pretty much scrapped, I thought."
Canadian Labour Congress President Ken Georgetti also warns that there's no reason to think Canadians would jump at a new voluntary savings plan when they barely use existing RRSPs.
"Our experience over 60 years is that voluntary options won't work," he said.
Haven't we heard this number before? The Liberal promise to add $700-million to the GIS will sound familiar to those who watched last week's slow-motion defeat of the Conservative government. That was the exact figure NDP Leader Jack Layton wanted to see in the March 22 budget. The Conservatives responded with about $300-million. The NDP took a pass and the government fell three days later. Having ruled out a formal coalition, the Liberals would need to win over the NDP with specific items should they attempt to govern in a minority Parliament. Could this be one?
The path of least resistance
Changing Canada Pension Plan rules requires the support of two-thirds of the provinces representing two-thirds of the population. While not impossible, Mr. Ignatieff's secure retirement option will be a hard sell. There is much broader support for at least some action in the other two areas of the Liberal plan - increasing the GIS and the CPP.
The Liberal plan does not spell out when CPP premiums would rise, or by how much. Pension experts have warned that premium increases will have to be phased in over a long period so that younger generations don't have to pay for extra benefits that would be enjoyed by seniors who didn't pay for them.
The devil, as always, is in the details.