Enhancement of the C$287.3 billion ($217.4 billion) Canada Pension Plan, Ottawa, is a welcome move in improving the country’s retirement security, said speakers at the Association of Canadian Pension Management conference in Charlottetown, Prince Edward Island, on Wednesday.
However, they differed on how big an impact the enhancement will have.
“There’s nothing bad about trying to improve retirement security,” said Matt Miles, vice president, product and marketing, group benefits and product solutions at Manulife Financial. “But I think the impact is so diluted that I wonder if there’ll be an impact.”
Mr. Miles compared CPP enhancement to spreading peanut butter on toast — “the more you spread it thin on toast, you tend to lose the flavor.”
He said any review of retirement in Canada should not just focus on income or asset accumulation but should take “a holistic approach” that looks at all costs affecting retirement, including health care. Also, Mr. Miles said most employers will readjust their plan designs to incorporate how CPP expansion will affect their overall retirement plans.
Allan Shapira, managing director, Aon Hewitt Canada, had his own analogy for CPP enhancement, calling it “a Goldilocks approach — I think it was just right.” The proposal was “big enough to provide meaningful benefits, yet small enough that it won’t be the cause of elimination of workplace pension plans.”
Paul Moist, retired president of the Canadian Union of Public Employees, said by phone at the conference that CPP enhancement shouldn’t “crowd out” other employer-sponsored retirement plans and will mean fewer people will need to tap the federal Guaranteed Income Supplement, an enhancement to the country’s social security system for low-income retirees.
Ministers from eight provinces and Canadian Finance Minister William Morneau agreed in principle on June 21 to expand the CPP by raising benefits to one-third of pensionable earnings from 25%, increasing the maximum annual earnings cap to C$82,700 by 2025 from the current C$54,900, and boosting employer and employee contributions by up to 1 percentage point each by 2025. The contribution increase — to as much as 5.95% from the current 4.95% — would be phased in beginning in 2019.
All provinces approved the enhancement except Quebec, which does not participate in the CPP, and British Columbia, where officials asked for more time to consider it.