Why CPP expansion is inevitable

There has been some forward movement on PRPPs in Quebec, Alberta and British Columbia primarily, but it’s at a snail’s pace, and Quebec is the only province that seems interested in the concept of mandatory private workplace pension coverage. There’s absolutely nothing that would concretely ensure low costs for PRPPs, though.

So I am now going to publicly flip-flop and add my voice to calls for CPP expansion, which I now believe to be an inevitable development, for the following reasons (in no particular order):

• 75% of private sector workers don’t have a workplace pension (and the PRPP will not solve this);
• private sector workplace pensions will continue their decline in coverage—I believe that small and medium-sized enterprises (and some large ones) would simply prefer to avoid the complicated burden of administering their own pension plans;
• Canadians are not using personal savings vehicles (e.g., RRSPs) to prepare for retirement with an adequate income;
• governments are taking action to curb public sector pensions to the point that I now believe public sector workers would realize little net gain in their total pensions from significant increases to the CPP (one of my primary objections to CPP expansion);
• Canadian financial institutions are more interested in protecting their current share of the retirement savings pie in the shorter-term than in the longer-term financial welfare of their customers, which their lobbying efforts for the PRPP have demonstrated;
• politicians have generally ignored the better ideas of independent pension experts such as the Alberta/B.C. Joint Expert Panel and Keith Ambachtsheer for improving pension coverage for Canadians;
• the CPP already covers most working Canadians;
• the labour movement and political left overwhelmingly support CPP expansion; and
• CPP expansion is likely the simplest solution to implement.

In fact, as far as I can discern, there remains only one significant barrier to CPP expansion: the idea that the economy cannot afford an increase in the CPP payroll tax. Federal Finance Minister Jim Flaherty (who supported CPP expansion in June 2010) has been saying for the past couple of years—along with a succession of Alberta finance ministers—that the economic recovery currently remains too fragile for business to absorb additional CPP costs, which is the mantra of right-wing business organizations. As long as those right-wing business organizations have the ear of the federal and certain provincial governments, I suspect that it will never be the right time for CPP expansion.

The reality of pension reform is that the choice is to pay now or pay more later. If society doesn’t pay more now to ensure retirement income adequacy of retiring Canadians, future seniors with less money will be contributing less to the economy and be more reliant on government for other forms of support such as the guaranteed income supplement.

Let’s just get on with it.

Related articles:

• Flaherty likes expanded CPP, but not now
• Finance ministers agree on CPP reform conditions
• Ontario wants CPP to be enhanced
• P.E.I. pushes for CPP expansion