The beauty of Finance Minister Joe Oliver's 11th-hour promise to consult stakeholders on expanding the Canada Pension Plan is that, at least for the duration of an election campaign, it allows for the consideration of as many possibilities for a new and improved CPP as Canadians can come up with.
The only one that is not on the table is making contributions to an expanded CPP mandatory. Which raises the question: Why bother with this charade in the first place? Those who are already saving enough through existing public or private vehicles do not need nudging from their nanny state to save for retirement. And those who do would not be helped by a voluntary plan.
Mr. Oliver's declaration on Tuesday that Ottawa will study "options" to allow Canadians to increase their CPP contributions is what happens when policy-making is at the mercy of the polls. A Nanos survey this month found that 88 per cent of Canadians support an increase in CPP benefits. And why wouldn't they? They live in the postcrash era of pension angst and envy in which retirement is idealized as a 30-year luxury cruise.
The Tories lost the messaging war on pensions long ago, as provincial governments, public-sector unions and pension-fund managers seized on the zeitgeist to call for a massive upgrade of the CPP. When Ontario announced its own patch – the inchoate Ontario Retirement Pension Plan – Ottawa looked like an old fogey.
Unfortunately, the debate has been framed by those with the most to gain from reform. Not workers, but governments grappling with unsustainable public-sector pension plans or short of cash to fund their infrastructure promises.
A Big CPP – that would double the maximum insurable earnings and monthly benefits, as proposed by Prince Edward Island in 2013 – would take the pressure off provincial public-sector plans that face big deficits. But it would not leave workers in those plans any better off. They would simply get a larger chunk of their pension from the CPP and less from their workplace plan.
Ontario's proposed plan, scheduled to start in 2017, would cover only workers without an employer-sponsored pension. Companies and employees would each pay 1.9 per cent of earnings up to $90,000, or about $3.5-billion annually. The plan would aim for – not guarantee – a 15 per cent replacement rate, or a maximum annual pension just shy of $13,000 in 2014 dollars.
Premier Kathleen Wynne has promised that ORPP contributions would be managed by an arm's-length entity. But critics worry that her model is not the independent CPP Investment Board, but the more politically sensitive Caisse de dépôt et placement du Québec.
Ms. Wynne's government, which needs to fund $130-billion in infrastructure promises, has pitched the ORPP as a new pool of capital "available for Ontario-based projects such as building roads, bridges and new transit." Would Ontarians need to worry about political intervention in investment decisions, à la Caisse?
Frankly, the whole pension debate has been driven by politics, so it is hard to feel that any reforms at the federal or provincial levels would be based on sound principles. A more credible approach might be an independent commission to determine which Canadians are undersaving and whether they need help, a swift kick or to be left alone.
The first myth to be dispelled is that pension reform would help the working poor, who do not have the means to save more and may need more direct government support in retirement. If undersaving exists, it involves better-off folks accustomed to a certain lifestyle now but facing a sharp decline in disposable income when they retire. These people likely make up a smaller proportion of the population than pessimists would have us believe.
These "are not underprivileged or low-income earners," economists Kevin Milligan and Tammy Schirle conclude in a 2014 study for the University of Calgary's School of Public Policy. "They are middle- and higher-income earners who lack an employer-provided pension, but presumably have the capacity to save for retirement on their own."
Expanding the CPP through supplemental contributions, whether voluntary or mandatory, makes "the investment decisions of the [CPPIB] that much more liable for the retirement fate of Canadians," Prof. Milligan and Prof. Schirle add. And "it promulgates a philosophy in which the federal government plays an ever-larger role, moving further into parts of our lives that have traditionally been considered areas of personal responsibility."
That is not a road down which you would think Stephen Harper's Conservatives would care to travel. But an election is looming and the polls are telling the Tories that a little nanny statism just might help their numbers.