“Minister’s Oliver’s CPP announcement has to be seen for what it really is, a feeble attempt by the Conservative government to blunt the repeated calls for CPP reform. Canadians will not be fooled by such a sham.” — Larry Brown, NUPGE National Secretary-Treasurer
Commentary by Larry Brown, National Secretary-Treasurer, National Union of Public and General Employees (NUPGE).
Ottawa (28 May 2015) — Conservative Federal Finance minister, Joe Oliver, announced on May 26 that the government is now willing to “consult” with Canadians about the possibility of allowing Canadian workers to “voluntarily” make additional contributions to the Canada Pension Plan (CPP) that would presumably result in enhanced pension benefits when they retire.
Federal government says it will consider additional voluntary contributions to CPP but critics remain concerned about stability of retirement security
This vague commitment has been greeted with a chorus of commentary saying that this is a major switch of position on the government’s part and that they have suddenly abandoned their vigorous opposition to an expansion of the CPP. Some have even suggested the government has taken “a 180-degree turn” by now agreeing to expand the CPP.
That would be sensible: the overwhelming consensus among most provincial and territorial governments, pension policy experts, the labour movement and seniors’ organizations is that an expanded CPP is the most effective, efficient and affordable way to improve the retirement income security of Canadians.
Unfortunately, this is not what’s happened.
Without mandatory contributions from employers, CPP would become just another individual savings plan for people who can already afford to save
CPP is a mandatory universal pension system that requires both employees, and crucially, employers, to contribute towards an employee’s eventual retirement pension. Without that element of a mandatory contribution from employers, it would become just another individual retirement savings plan for those who are already fortunate and wealthy enough to have some extra money to sock away for their retirement.
This announcement is simply a smoke and mirrors proposal from the government, a proposal that is designed to blunt the demands for real reform of the CPP, by offering the vague possibility of this misleading alternative.
Government refuses to acknowledge need for across-the-board mandatory improvements to CPP
Even when announcing this ill-defined proposal, the Conservative government still continues to oppose effective expansion of the CPP. Minister Oliver was adamant in his announcement yesterday that “the government will not entertain an across-the-board expansion of CPP contributions.” In fact, he described such a plan as an “economy-destabilizing” move and a “job killer.” The reality is that neither of those claims is remotely true, of course. There is simply zero evidence to support those assertions.
When the Canadian Federation of Independent Business (CFIB), the most staunch anti-pension organization in the country, says it’s “delighted” with the proposal, it pretty much proves the point that this is not real reform aimed at benefiting the over 11 million Canadians who currently don’t have a workplace pension.
Stagnant wages, job losses are major barriers to people saving more for retirement
Wages in this country have stagnated, and while inflation has been low in recent years, it has steadily eaten away at the value of working people’s wages. The simple fact is that workers are not saving enough for their retirement because they don’t have enough spare cash to put aside.
The government can create all the tax revenue-draining Tax Free Savings Accounts, RRSP’s and the like that they want; the reality is that a huge and growing number of Canadians are not able to afford to save enough for their retirement. It’s not because they are financially illiterate, it’s because they don’t have the money they need.
The mandatory component of CPP allows workers to have stable finances into retirement
The overwhelming evidence shows that voluntary contribution pension plans do not have the same level of success in providing decent retirement security as mandatory contribution pension plans, like the current CPP.
The major reason for the success of our CPP is that it’s built on mandatory contributions from both workers and employers. In return, all workers get a secure defined pension benefit when they retire; as it stands, they don’t get enough pension. Allowing for a voluntary contributions component to CPP will allow employers to continue to shed their responsibility for helping their employees earn a decent retirement income — it will continue to force most employees to simply fend for themselves.
A voluntary add-on, by which people with spare cash can use the expertise of the CPP to grow their savings, is not a totally bad idea, it’s just a very limited one, and it would be very difficult to make the idea workable.
It won’t help those Canadians who are already hard pressed. It won’t do a thing to force employers to live up to their responsibilities.
Minister Oliver’s CPP announcement has to be seen for what it really is, a feeble attempt by the Conservative government to blunt the repeated calls for CPP reform. Canadians will not be fooled by such a sham.
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 360,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE