No need to expand the CPP: Report

Experts say it won’t increase overall retirement savings



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As Ontario Premier Kathleen Wynne clarifies and possibly softens her line on what her government is expecting around Canada Pension Plan reform, a new report from the Fraser Institute suggests expanding the program isn’t necessary.

“When you consider the facts, not the rhetoric, it becomes abundantly clear that expanding the CPP is a solution in search of a problem,” Charles Lammam, director of fiscal studies at the Fraser Institute and co-author of the study, said in a release.

First of all, the study argues, most Canadians are financially prepared for retirement. It points to the fact that in 2014, Canadians held $7.7 trillion in non-pension assets, such as stocks and real estate, compared to the $3.3 trillion held in pensions.

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The study comes as Wynne said yesterday the Ontario government could accept an enhanced CPP even if it doesn’t meet the same benefit levels as the Ontario Retirement Pension Plan. Finance ministers are meeting in Vancouver next week to see whether they can reach an agreement on enhancement of the CPP and the Quebec Pension Plan, something that would require the approval of seven provinces representing two-thirds of the population.

“We’ve said if we can get to, sort of, two-thirds of the value of what we have . . . what we’ve worked up with the Ontario Retirement Pension Plan, that’s one of the metrics that we would look at for a CPP enhancement,” The Canadian Press reported Wynne as saying.

Quebec Finance Minister Carlos Leitao also weighed in on Quebec’s position ahead of next week’s meeting. He said the scenarios still on the table include one that would beef up the CPP program across the board and another that would target middle-income earners, The Canadian Press reported.

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According to The Canadian Press, Quebec has concerns about the impact of a broad-based increase to CPP contributions on workers and employers. “We think that there is no crisis regarding public pensions in Canada,” it quoted Leitao as saying.

“But yes, we are willing to look at ways to improve the current system. But any such improvement . . . targeted to a certain income group should be relatively modest and put in place gradually.”

When it comes to the merits of expanding the CPP, the Fraser Institute study noted pension expert Malcolm Hamilton also argues Canadians contribute more to private pensions than many think. From 1990 to 2012, private contributions to registered retirement savings and registered pension plans increased, as a percentage of employment income, to 14.1 per cent from 7.7 per cent.

And for seniors who are struggling economically, CPP expansion won’t help since many never contributed to the plan. For those who have done so, an increase in CPP benefits could trigger clawbacks from other government transfers, the study noted.

The study also argues higher CPP contributions won’t increase overall retirement savings because Canadians will put less into RRSPs, tax-free savings accounts and other investments.

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The Fraser Institute also suggests administrating the plan is very expensive, with the costs including more than running the Canada Pension Plan Investment Board. While running the CPPIB costs $803 million each year, the entire plan costs $2.9 billion.

The study comes amid a flurry of debate about the CPP. According to The Canadian Press, Conservative finance critic Lisa Raitt is questioning the federal government’s push to expand the plan, suggesting it hasn’t shown evidence there would be widespread benefits from the proposals on the table. The Canadian Federation of Independent Business also noted today it had collected more than 50,000 petitions from small-business owners opposed to CPP premium hikes.

The Association of Canadian Pension Management has also weighed in recently (PDF) with its proposals for pension reform in Canada. In a recent summary of its proposed changes, it made two main recommendations:

  1. Enhancement to CPP/QPP on earnings between 50 per cent and 100 per cent of the year’s maximum pensionable earnings threshold, with the ability for employers to provide a comparable workplace retirement plan in lieu.
  2. A mandatory workplace retirement savings arrangement for earnings above and up to 150 per cent of the threshold.

This article was originally published on Benefits Canada.

6 comments on “No need to expand the CPP: Report

  1. Why have a pension fund, use off-shore accounts like the Fraser Institute employees.


  2. “most Canadians are prepared by retirement”?How about percentages rather than a vague term.”Canadians hold 23 trillion in non pension assets and blah blah in pension holdings.”Again how about being specific information that would be more relevant as what percentage of Canadians have non pension holdings and what percentage of Canadians do not have non pension holdings and what percentage of Canadians have pension holdings and what percentage do not .What percentage do not have either.What percentage of Canadians feel prepared for retirement and what percentage do not feel prepared


  3. What about the Old Age Security benefit? That sum is next to elder abuse and is a black mark on the Canada we thought we lived in that seeks to leave no one behind,,well,,PC’s and Liberals,,there is money galore for babies but nothing for the poverty level Canadians who, years ago were duped into believing that if we gave the money to our employees and struggling business, going without ourselves to do so to help grow Canada, that when we got old we would be rewarded with an OAS pension. WHAT A LIE!


    • @ revelations – I would disaggree with your comment on their being money galore for babies. Check out the latest Summer 2016 family profile to see how a family of 4 is surviving on 26k per year (<7k per person per year; and this is an unusual situation, the majority of families would not qualify for the benefits this family is recieving). Your max OAS is almost 7K per year, plus CPP, GIS, senior pension splitting and the many other wonderful tax advantages and deals our seniors get. Yes the new LIBs have enhanced the child care benefits but is it progressive and reduced dramatically based on family income. Not only that but they eliminated the family income tax credit (income splitting the PCs brought in) which was a help to certain middle class families. Do I think OAS should be enhanced as well as CPP – perhaps, but they are already indexed to the CPI which acounts for some inflation over time.


  4. The Frasier institute is not “experts” the Frasier institute is a right-wing think tank meant to push the country further and further towards unbridled free-market capitalism. Which has turned out so well for the majority of us so far.

    The fact that a small percentage of Canadians hold a great amount of wealth doesn’t mean that there is nothing to be worried about for everyday Canadians’ retirement. Those non-pension assets aren’t all retirement accounts, and the way they are distributed REALLY matters no matter how much hand-waving the Fraser Institute does.

    People may reduce the amount they put into RRSPs or TFSAs if they contribute to an enhanced CPP (although the Fraser Institute hasn’t actually shown this to be true; repeating an assertion three times doesn’t count as evidence). But, as the Fraser Institute well knows, people’s contributions to RRSPs and TFSAs aren’t usually matched by their employers (as CPP contributions are), and – most importantly – individual retirement accounts mean individualized risk. People are generally not savvy investors, and are much better off with plans managed with their fiduciary interest in mind. Employers used to offer such plans, but they abandoned them in favour of self-directed retirement plans and hung their employees out to dry.

    As for the claim that CPP is an “expensive” plan. Well, that’s pretty laughable. I mean, the Fraser institute can publish anything they want, but that doesn’t mean you should just reprint it without critique.


  5. “This article was originally published on Benefits Canada.” In other words, this article comes from a publication that caters to specialists who design and administer workplace benefits, including company pension plans. The proposal to expand CPP is being floated because fewer employers are offering workplace pension plans. An expansion of CPP may result in even fewer companies offering such plans and those that do may contribute less from the employer side as they have to contribute more to CPP. Either way, Benefits Canada anticipates that an increase in CPP will result in decreased demand for the services their constituency provides. Just like the Fraser Institute report itself, this is a rather self-serving article.

    How about publishing an article from a disinterested point of view instead?


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