http://www.thestar.com/business/article/823393--ministers-move-closer-to-pension-reform


Ministers move closer to pension reform

By James Daw

Personal Finance Columnist CHARLOTTETOWN — Finance ministers have moved closer to a deal that would result in a gradual increase in Canada Pension Plan benefits.

The federal and provincial ministers, and pension experts following their meeting, agreed the outcome is an important indication of a developing consensus among governments that a sizable minority of Canadians could be facing a decline in living standards in retirement unless action is taken.

“I think this is a significant step forward,” Federal Finance Minister Jim Flaherty said after a closed-door meeting at an ocean-side golf resort.

Only Alberta Finance Minister Ted Morton expressed outright opposition, even thought the proposal is for a modest, gradual increase in benefits that would be fully funded from contributions in advance of a person retiring.

“The CPP is a bad deal for young people,” said Morton, noting that anyone born after 1970 will scarcely collect as much in benefits as they and their employers will contribute during their careers.

But, in a world of extremely low interest rates and negative stock market returns over the past decade, a guaranteed, inflation-protected pension is looking more attractive than it might have in the 1990s.

The CPP overhaul was proposed last Thursday in separate letters from Flaherty and Ontario Finance Minister Dwight Duncan, too late for the other ministers to confer with their cabinet colleagues.

“I can tell you we were not unanimous,” Flaherty told reporters.

But, he said, there was enough support from a substantial majority to at least have officials develop detailed proposals, with two provincial ministers saying they would have to return and consult with the rest of their cabinet colleagues.

Sam Hamad, minister of labour and social solidarity for Quebec, said he and Quebec Finance Minister Raymond Bachand “are not in favour or against (what is proposed). However, there are questions on the table and we need to address them as soon as possible.”

Any change to CPP would require the support of seven provinces, representing more than two-thirds of the population, even though Quebec has a parallel pension plan with slightly different benefit rules. Together, Quebec and Alberta have a large enough population to veto any change.

The officials are to develop proposals for the level of benefit increase and the phase-in period for the next meeting of finance ministers in November or December. Flaherty said there was no support for doubling CPP benefits, as proposed by the Canadian Labour Congress.

The maximum CPP benefit is now a taxable benefit of about $11,000, but those who receive less than the maximum and have no personal savings would receive the tax-free Guaranteed Income Supplement to Old Age Security to make up any shortfall.

Ontario’s Dwight Duncan said he considered the agreement of a majority of provinces a major development.

“This is the first time there have been enough provinces agreeing that there should be modest enhancements to Canada Pension Plan,” he said in an interview. “That’s pretty substantial.”



Duncan said he wrote his letter to ministers after meeting with leaders of the Canadian Auto Workers union, the Ontario branch of the Canadian Union of Public Employees and the CLC.

He said they pointed out that research into Canada’s retirement system has focused too much on the way it is serving retirees and will serve those close to retirement, and not enough on those who will likely not enjoy the same level of investment earnings or home price appreciation.

Officials will be directed to assess the potential impact on the economy, consumer demand and job creation that an increase in CPP contributions might have. They are now set at 9.9 per cent of pay on income up to $47,200, with contributions split equally between employers and employees.

“You want to make sure you fix the problems and you don’t fix something that doesn’t need fixing,” said Duncan.

He noted there have been suggestions that an increase in CPP benefits could be targeted at those above a certain income level.

While the ministers met about 125 workers representing mainly-public sector unions marched in circles at the entrance to the resort chanting “Hey-ho! Hey-ho! CPP has got to grow.”

Larry Brown, national secretary treasurer of the National Union of Public & General Employees Union, said CPP and Old Age Security barely provide a poverty level of income, and should be increased now.

For the future, he argued employers without pension plans should be required to contribute more to CPP, so their employees would then accumulate a higher CPP pension.

“If this was the typical union position we would say we are covered and the rest of the people can go suck eggs. But the fact is we want (company) pensions for the people that don’t have them, we want to guarantee the pensions that do exist and we want to increase CPP. If you put all those together, then those taxpayers are going to have a public system that actually protects them.”

A task force of the Canadian Institute of Actuaries released a report that gave conditional support for multi-employer pension plans, administered in the private sector, which the ministers of finance also agreed to examine in the coming months.

Flaherty said the rules to allow financial institutions provide such plans to serve employers of all sizes, as well as the self-employed, could be in place as soon as the middle of next year.

But the task force of actuaries calls for having minimal set of government requirements, but said it “does not see how this plan could work if participants could opt in and out at will.”



The actuaries envision a plan that would set a target for the pension benefit that a given level of contributions could provide, but argues there should be no guarantee provided by employers or future generations.

Benefits could be reduced if investment returns were less than expected.

The actuaries argue everyone’s contributions should be held in the same investment pool and administered by trustees of the plan, not in individual investment accounts as insurers now provide for employees of some companies.

Morton of Alberta said his province is strongly supportive of such plans, but only if the cost of administration is kept in the 0.25 to 1 per cent of assets per year.

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Sunny Leone a true Canadian DESI now back in India !.

So you think this is not a good step, eh?
The crying smileys in your post indicate you don't like it

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"