Prince Edward Island is putting together a new proposal to enhance the Canada Pension Plan in the hope of getting Ottawa and the provinces on board.
Finance Minister Jim Flaherty is soon expected to call a meeting of his federal and territorial counterparts, who will gather for the first time since they agreed on a “way forward” on CPP reform six months ago at Meech Lake.
Government officials have been working on options since the meeting and PEI Finance Minister Wes Sheridan is taking a lead role in putting together a proposal. Ministers agreed in December to look at potential economic triggers such as GDP growth and the unemployment rate that could be used to show the economy is strong enough to absorb higher CPP premiums to pay for increased CPP benefits.
Since then, there has been little public discussion of the issue, leading some to suggest momentum on CPP reform has faded. Finance Minister Jim Flaherty had said officials would report back to the ministers in six months, yet six months later, no meeting has been announced.
A spokesperson for Mr. Flaherty said Ottawa is “still looking at options for the meeting.” The minister will be in Ireland this week with Prime Minister Stephen Harper for the G8.
A spokesperson for Mr. Sheridan said the PEI Finance Minister is working on a proposal, but that it was too early to discuss it publicly.
Government officials and groups that closely follow pension reform indicate that the political dynamic has shifted considerably since December. One key factor is Dwight Duncan’s resignation as Ontario finance minister to work at a Bay Street law firm. Mr. Duncan had been the lead provincial voice in support of enhancing the CPP. The federal Conservatives have been cool to CPP reform, arguing that the focus should be on Pooled Registered Pension Plans (PRPPs) – a federal initiative that must be approved province-by-province.
The PRPPs would operate like a group RRSP. Employees could make payroll contributions, but employers would not be forced to contribute.
To date, British Columbia, Alberta, Saskatchewan and Quebec have all introduced PRPP legislation. All provinces support PRPPs in principle.
Mr. Duncan took the position that Ontario would only proceed with them if Ottawa agreed to increase CPP premiums and benefits.
The May 2 Ontario budget – delivered by new Finance Minister Charles Sousa – said Ontario would continue to support a modest CPP enhancement and would introduce legislation to implement PRPPs. The fact that one was not linked to the other is being viewed as a significant development, including by Mr. Duncan.
“I was struck by it, and it’s certainly not consistent with the view I held as finance minister,” said Mr. Duncan, who now works for McMillan LLP. “I would caution the Ontario government that they ought not to lose their nerve on this.”
Mr. Duncan said it’s clear that another voluntary savings vehicle like the PRPPs won’t address the problem of Canadians not saving enough for retirement. But he sees little chance of Ottawa approving CPP reform. “I’m not confident the federal government wants to move on this,” he said.
A spokesperson for Mr. Sousa said Ontario is moving ahead on PRPPs because of the pledge in December related to CPP.
Amending the CPP requires the support of two-thirds of the provinces representing two-thirds of the population. Ottawa and the provinces have been discussing and studying pension reform for years now. Mr. Flaherty has said there is not the required level of support for changing the CPP. However, the level of support shifts with each provincial cabinet shuffle or change in provincial government.
The Conservative government in Alberta had been highly critical of CPP enhancement, but has taken a neutral position since Doug Horner became finance minister in May, 2012.
“We want to make sure that the economy is on the mend and strong and stable and that we’re in the right direction before we consider doing something around the CPP,” Mr. Horner told The Globe and Mail. “We’re not closing the door on it.”
Keith Ambachtsheer, director of the Rotman International Centre for Pension Management, said the push for CPP changes appears to be fading.
“I don’t see any big group favouring this other than the usual suspects,” he said, referencing labour groups and CARP, the seniors advocacy group. Mr. Ambachtsheer said neither voluntary PRPPs, nor CPP enhancements, are the right solution to a savings problem that is largely limited to middle-income Canadians working in the private sector. He advocates a Canada Supplemental Pension Plan that would automatically enroll workers who do not have a workplace pension. The funds would be managed by an arm’s-length group operating like the Canada Pension Plan Investment Board.