Skip to main content

Finance Minister Jim Flaherty speaks with reporters after a Conservative caucus meeting in Ottawa on Dec. 8, 2010.

Adrian Wyld/THE CANADIAN PRESS

Provinces are planning to fight for enhancements to the Canada Pension Plan at a key meeting on Monday, setting up a showdown with the Harper government over how Canadians will fund their retirements.

Just days before federal and provincial finance ministers meet in Kananaskis, Ottawa made a surprise move to reject CPP enhancements for now in favour of a new privately run savings vehicle.

The shift in federal priorities on pension reform comes as the Bank of Canada heightens its warnings that Canadians are borrowing too much and saving too little, putting some households at risk when interest rates inevitably climb back from near-record lows.

Story continues below advertisement

Ottawa's critics insist long-term pension problems must be tackled now and premium increases can be phased in, but the Harper government is aligning itself with Alberta in arguing the economy cannot absorb a new hit on the take-home pay of Canadians.

"I think all are agreed that while we will continue to look at improvements, now is not the time for CPP premium increases," Prime Minister Stephen Harper said Thursday in the House of Commons in response to objections from the NDP.

Ontario Finance Minister Dwight Duncan said as far as he knows, Alberta is the only province that opposes CPP enhancements. He said provinces are working the phones Thursday planning to push the CPP option on Monday.

"It's just not acceptable in our view to put this discussion off," said Mr. Duncan in an interview. "A number of us, the provinces, have talked over the course of the last number of hours and there's still very substantial support for moving forward [on CPP]"

Insurance companies, business groups and the Alberta government praised Ottawa's proposal for a Pooled Registered Pension Plan (PRPP) as a targeted response. One insurance firm, Sun Life, called it a "historic milestone" that could expand pension coverage to millions of Canadians.

But other provinces, national labour unions and federal opposition parties insist another voluntary savings option will not address the fact that millions of Canadians are not saving enough to maintain their current living standard in retirement.

While the recession exposed the harsh realities of high household debt, particularly in the United States, it also exposed inadequate protection for workplace pensions in cases like the bankruptcy of Nortel. Critics of Ottawa's latest plan are concerned the new pool of savings managed by the private sector will not have the same level of protections as the CPP.

Story continues below advertisement

When Ottawa and the provinces last discussed pensions in June, Mr. Flaherty was a surprise advocate of a "modest" increase to CPP premiums and benefits as a way of ensuring, through a mandatory policy, that Canadians save more for retirement.

For the past six months, officials at both levels of government were assigned to study both a CPP enhancement and a private-sector option for people who do not have workplace pensions. Mr. Flaherty said there is simply not enough provincial support right now to move ahead with CPP reform.

"It's a multi-jurisdictional challenge to get a consensus on CPP. It's clear that we do have broad support for the private-sector solution," he told reporters on Parliament Hill Thursday.

Changing the CPP requires the support of two-thirds of the provinces representing two-thirds of the population. Even if that threshold could be met, it would be politically and technically challenging to accomplish a major CPP change over the objections of individual provinces.

Canadian Labour Congress president Ken Georgetti praised Mr. Flaherty in June for supporting CPP improvements. Now he's furious.

"Voluntary systems don't work," he said. "I guess a couple of lunches with the insurance and the banking industry have more effect on this government than Canadians' public opinion. It's just absolutely unacceptable in our view."

Story continues below advertisement

The PRPP would be administered by regulated private-sector institutions, such as insurance companies, and Mr. Flaherty suggested the rules may require companies that do not currently offer a plan to offer the PRPP to their employees. In that scenario, the employees may be automatically enrolled in the plan and would have to specifically opt out should they not want to participate.

The minister says the plan should appeal to small business owners who may not have the expertise or resources to set up a workplace pension. The PRPPs will pool contributions from many individual companies and workers, allowing them to take advantage of the investment advantages of large retirement funds.

Keith Ambachtsheer of the Rotman International Centre for Pension Management has been following the technical negotiations closely. He said Ottawa appears to be taking the simplest option with the PRPP. "I think there's considerable evidence that something stronger than this is required to solve the problem," he said.

Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter