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Politics Finance ministers keep options open for CPP reforms

Finance Minister Bill Morneau, right, chats with Bank of Canada Governor Stephen Poloz as they start a meeting with provincial and territorial counterparts, in Ottawa, on Monday, Dec. 21, 2015. THE CANADIAN PRESS/Fred Chartrand

The Canadian Press

The country's finance ministers have put a wide range of options on the table for amending the Canada Pension Plan: They could raise payroll premiums to double payments in retirement. They could focus improvements on the middle class. Or they could do nothing.

Federal Finance Minister Bill Morneau said he was pleased with the tone of the discussion on the issue during his first face-to-face meeting with his provincial and territorial counterparts. They will meet later this year to decide what to do – if anything.

The lack of a clear decision on CPP expansion likely increases the odds that Ontario will move ahead with its own Ontario Registered Pension Plan. Ontario Finance Minister Charles Sousa said the province will continue working on the "two tracks" and will decide later on how to proceed based on how talks progress toward a national CPP expansion.

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Quebec's Finance Minister indicated there was strong support among premiers for a targeted change aimed at Canadians who earn between $50,000 and $75,000 a year.

Ottawa and the provinces agreed that officials will start working right away on various options and the ministers will review that work early in the new year. A more formal meeting would take place in June to review the work again, which would set the stage for potential decisions when the finance ministers hold their annual December meeting.

"We are moving at the pace that I had hoped," Mr. Morneau said. "We've all agreed that we should enter into discussions to review next steps. That's an important milestone."

Ministers spoke after a day-long meeting at Finance Canada headquarters hosted by Mr. Morneau. The ministers also met for dinner Sunday evening.

Reforming the CPP requires the support of Ottawa plus seven of the 10 provinces representing two thirds of the Canadian population. Saskatchewan Finance Minister Kevin Doherty strongly opposed the idea ahead of the meeting but said afterward that he supported the study.

"We've agreed on a path forward with respect to coming back a year from now to talk about potential options, including not doing anything," Mr. Doherty said. "So I think … the economic realities of the country a year from now will dictate where we proceed from there."

Quebec Finance Minister Carlos Leitao, who has expressed concerns about CPP expansion because he believes payroll premiums are already too high, said ministers agreed that any change should be modest and targeted.

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"For low-income people, there are already a series of social programs. Higher-income people have private retirement plans and other options. It's really those who make between $50,000 and $75,000 where potentially there's a need to enhance the retirement system and that's what we'll discuss over the next six months," he said.

Susan Eng, vice-president of the seniors advocacy group CARP, expressed frustration Monday that no clear decisions were made.

"CARP members are going to be disappointed that they once again failed to act on CPP. They just agreed to keep talking," she said. "The need to act has been well-settled."

Ms. Eng said Canadians have given politicians a clear mandate to act through the elections of majority governments federally and in Ontario, where Liberals were elected on pledges to enhance pension plans.

Canadian Labour Congress president Hassan Yussuff said current economic realities should not be a factor in debating the merits of a long-term change such as CPP reform.

"There's always been that worry, but we brought in the social security system during the Depression when the economy was in the worst shape," he said. "I think some of the hesitancy has to be challenged, but more importantly the fact that it's still on the agenda speaks to the desire for Canadians to see enhancement to CPP."

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Canadian Federation of Independent Business president Dan Kelly has warned ministers that higher CPP payroll premiums would hurt employment.

"Small firms will be temporarily relieved to learn that there is no immediate consensus on CPP expansion," Mr. Kelly said.

"Revisiting a bad idea over and over is not going to suddenly make it a good idea," he said.

Ottawa and the provinces have been down this road before.

The issue heated up in 2009 when the finance ministers commissioned several research papers on the topic. The main summary paper, by University of Calgary professor Jack Mintz, concluded that Canadians are "by and large, doing relatively well" in saving enough for retirement.

However, Dr. Mintz reported that evidence shows about one fifth of Canadians may not have enough savings to replace at least 90 per cent of their preretirement consumption. The paper said that while the evidence strongly suggests some Canadians are not saving enough, it is not always clear which Canadians are undersaving, by how much and why

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