On the CPP, Flaherty’s do-nothing plan is no plan at all

Dan
Dan Leger
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It’s impossible to know how many younger Canadians, say in the 18-35 age group, were following the pension talks last week between federal Finance Minister Jim Flaherty and the provincial ministers. Probably not many.

You can’t blame them if they tuned out. After all, the meeting was a piddling one-hour formality that produced no progress on bolstering the Canada Pension Plan to meet the needs of future pensioners.

That means you, 18- to 35- year-olds. CPP reform is all about future generations, but Ottawa just can’t seem to understand that.

The proposal, sponsored by P.E.I. Finance Minister Wes Sheridan and others, won’t put another dime into the pockets of the dreaded Baby Boomers. The relative wealth of that generation is off the scale compared with any known cohort in history.

The following generations, as everyone knows from their own families, friends and neighbours, feel somehow ripped off. It’s harder to find a job, education is expensive and they have lived through a series of hard recessions without the protection of seniority.

Not only that, but changing trends in the workplace are also acting against the long-term economic security of younger Canadians. Fewer companies are offering defined-benefit pension plans. Many offer no plan at all.

A lot of knowledgeable people believe one way to deal with that worrisome uncertainty is to bolster the CPP. The national plan, combined with the Quebec Pension Plan, provides pretty much everyone with at least a small pension. And does it fairly.

It is also immense, which matters. The CPP fund is now worth $193 billion and growing. It describes itself as “one of the largest and fastest-growing single-purpose pools of assets anywhere in the world.”

That gives the CPP clout. It doesn’t have to pay top dollar for every asset it buys. To that point, it is a blue-chip fund participating fully in the economy. Our savings are at work out there in the world, and making money for us while they’re at it.

So why would we not build on the strengths of this profound asset and make millions of Canadians better off in their later years?

Right now, the CPP Fund is scheduled to keep growing at a solid pace until 2022, when it will be worth some $340 billion. But if nothing changes, the rate of growth will slow after that, as more people draw from the account and fewer contribute.

At the same time, fewer Canadians will likely be covered by private plans, even fewer of the kind that guarantee a set level of income over an uncertain number of years.

So we can do something about it now and lock in better benefits for future workers. Or we can stand around and do nothing, also known as “pulling a Flaherty.”

The finance minister seems content to just hope for the best and wait for everything to work out. We passively wait for the global and Canadian economies to sort themselves out over time. Then growth will pick up, jobs will be created and Canadians will accumulate wealth, which they will save.

This approach seems more theoretical than practical.

What Sheridan and the other provinces proposed was a slow increase in contributions that would gradually build the CPP fund so that near-future generations will be guaranteed a reasonable return on their investment.

But Flaherty is having none of that, despite having himself proposed, and abandoned, a small CPP contribution increase in 2010. Now, any increase in contributions is one of those dreaded “job-killing taxes.”

Flaherty usually seems like a sensible-enough fellow.

Why now does he not see the value in making changes that will benefit Canadians for generations to come?

That’s precisely the problem, he replies. Flaherty doesn’t want to commit future governments to such a major policy.

On that, the minister makes no sense at all. Governments make long-term commitments; it’s why they’re elected. It’s called vision and leadership, which the provinces are showing and Flaherty is forsaking.

Instead, Flaherty wants Canadians to invest in pooled retirement or tax-free savings accounts, which they certainly should do, if they can. Some can’t, so those options inevitably will cover only part of the population.

Flaherty won’t make “commitments far down the road” because “we might not even be the government, or they (provincial ministers) might not be the government.''

Not the government? No wonder the younger crowd think they’re getting hosed.  

Dan Leger is a Halifax-based writer and commentator.

Twitter: @Dantheeditor.

Organizations: CPP Fund

Geographic location: Ottawa

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  • JP LAPORTE
    December 25, 2013 - 23:16

    It is unfortunate that Canadians have two flawed and competing options foisted onto them: a doubled CPP or voluntary, privately-run PRPPs. Missing from the policy debates is the idea that I first proposed in 2004, a voluntary Supplemental CPP. Employers and employees who can afford to save more for retirement would have the option of giving their extra contributions to the CPP Investment Board, where they could be invested professionally, at a small fraction of the costs charged by banks and insurance companies. TFSAs are voluntary, and Canadians have dumped billions into them since 2009. The Supplemental CPP is the middle of the road solution that Canadians need. However, our media don't do research anymore, so most Canadians will stay in the dark on the oldest of the CPP reform ideas first discussed in Benefits and Pension Monitor's October 2004 issue.

  • Angus
    December 24, 2013 - 13:20

    What a pile of spit! You can see the steam rising from it. Ask anyone you like, from any age group and they'll all will say they want their CPP doubled and no doubt be able to start collecting yesterday. Then ask them are they willing to pay more for the pleasure and they'll yell and scream, 'not one red cent from my pocket. I can't afford to pay anymore!' case closed!