This op-ed was published on May 10, 2016 by the Financial Post.
When Canada’s finance ministers meet in June to discuss retirement security for millions of Canadians, they will be faced with an important decision: Do we allow provinces to go it alone and create a fragmented pension system that varies from one jurisdiction to the next? Or do we come together and improve on a national system that benefits all Canadians, no matter where they live and how much income they earn?
This decision will impact Canadians for generations to come. We must get it right by strengthening our national retirement savings system through low-cost, effective improvements that target those most in need.
The finance ministers’ meeting in June comes at a time when some provinces have indicated they are prepared to move forward with their own reforms in the absence of an expansion of the Canada Pension Plan.
Having provincial governments go it alone with pension reform would be unfortunate for Canadians who deserve parity in retirement outcomes, regardless of the province they live in. The creation of a patchwork of provincial pension plans would result in retirement disparity among provinces and undermine labour mobility. Canadians must be free to move within Canada and carry their pensions with them.
We urge Canada’s leaders in the coming weeks and months to seek pension improvements that are cost-efficient and practical for provinces to implement. Fortunately, the issues at hand are well-defined and can be addressed with targeted solutions whose impact on the economy and, in particular, on labour costs and job creation, can be minimized while building upon the strength of Canada’s already sound retirement system.
We would support a national retirement savings solution that is consistent with the following guiding principles:
- Protect low-income seniors from falling into poverty: The federal government’s recently announced changes to the guaranteed income supplement are a good first step.
- Enhance savings opportunities specifically for those most in need: Numerous studies show a limited number of Canadians need to save more for retirement — and they are almost exclusively in the middle to higher income brackets.
- Avoid forcing lower-income Canadians to over-save: The combination of Old Age Security, the guaranteed income supplement and CPP benefits already provides Canadians in lower income brackets with adequate replacement income in retirement. Mandatory enhancements of CPP would take more money out of their pockets today for very little benefit later on.
- Moderately expand mandatory savings for modest-income Canadians: The CPP plays a central role in retirement security for Canadians with modest incomes. The conversation about the enhanced role of CPP should focus on this modest-income bracket. We caution, however, that mandatory savings have an adverse impact on wages and job creation. Therefore, it is essential that any new measures be targeted in scope and accompanied by reductions in other contributions to offset the impact on payroll costs.
- Emphasize personal choice and responsibility for higher-income Canadians. Canadians with higher incomes would benefit from a solution that emphasizes personal responsibility, rather than enacting measures that guarantee their retirement income paid by all taxpayers. The solution for higher-income Canadians includes more access to workplace pension plans, as well as plan features that drive higher savings while respecting individual choices and circumstances.
- Avoid a provincial patchwork. Building on existing plans is more efficient and cost-effective than setting up new ones. This also safeguards national labour mobility.
Hardworking Canadians deserve to know their retirement futures are secure, no matter where they live in Canada. We can achieve better retirement outcomes for all Canadians through national improvements to our system that protect our seniors, target those most in need, emphasize personal responsibility and avoid a provincial patchwork.
We urge Canada’s finance ministers to choose that option.
John Manley is president and chief executive officer of the Business Council of Canada. Perrin Beatty is president and chief executive officer of the Canadian Chamber of Commerce.