NUPGE encouraged by CPPIB call for improved CPP | National Union of Public and General Employees

NUPGE encouraged by CPPIB call for improved CPP

'We support your position that the best fix to the current situation lies in expanding the Canada Pension Plan (CPP) and agree with your hesitations about the effectiveness of proposals for new provincial or inter-provincial pension plans.' - Larry Brown.

Larry Brown, national secretary-treasurer of the National Union of Public and General Employees (NUPGE)Ottawa (21 Sept. 2009) - The National Union of Public and General Employees (NUPGE) is encouraged by remarks made last week by the head of the Canada Pension Plan Investment Board (CPPIB) suggesting that expansion of the CPP program could be a solution to the retirement crisis that Canadians are facing.

David Denison, president and CEO of the CPPIB, speaking at the International Conference of Social Security Actuaries and Statisticians on Sept. 16, suggested that governments can use the CPP to do more than just meet its current aim of providing Canadians with an annual retirement income of 25% of the average industrial wage.

Larry Brown, NUPGE's national secretary-treasurer, has written a letter to Denison. In part Brown says:

“When you say, Mr Denison, that ‘Canadians should be assured of securing a sufficient minimum income replacement rate (to) retire with security and dignity’, we couldn’t agree more. We also support your position that the best ‘fix’ to the current situation lies in expanding the Canada Pension Plan (CPP) and agree with your hesitations about the effectiveness of proposals for new provincial or inter-provincial pension plans.”

Not as effective

Although Denison said the idea of an inter-provincial plan has merit, he cautions that such a plan, especially if voluntary, would have significant limitations. These would include “the same underlying issues inherent in any defined contribution arrangement,” namely that the risk would be borne by the plan members, not the plan itself. Individual accounts are not as effective as pooled plans.

Denison noted in his speech that some key “pillars of the retirement system that were put in place aren't working as had been hoped," particularly registered retirement savings plans, which few Canadians use, and company pension plans to which 11 million working Canadians have no access.

His remarks are supported by a recent study by the Canadian Institute of Actuaries, finding that only one-third of Canadian households are putting enough away to cover basic necessities in retirement.

He stated that the CPP model offers higher returns and lower risks, all at a “far lower cost than can be purchased from commercial money managers, and at a fraction of the cost individuals must pay for the management of their individual portfolios."

One of the key benefits of the CPP model is scale, because bigger funds can manage money more cheaply, or “bargain down” private sector money managers. The CPPIB manages $117 billion in assets.

NUPGE proposal to expand CPP

Brown notes in his letter to Denison that NUPGE has a standing proposal for CPP reform that dovetails perfectly with Denison’s ideas, and would go a long way toward addressing the issue of the declining number of Canadian workers covered by workplace pension plans.

NUPGE has proposed that the legislation governing CPP be amended to require employers without workplace pension plans to pay additional CPP premiums. The extra money would be used to pay improved CPP benefit coverage to workers during any years they work for employers without a workplace plan.

Currently, the union notes, employers who meet their responsibilities by providing a workplace pension plan pay the same CPP contributions as employers who don’t have a workplace pension. Not only is this unfair, it acts as a disincentive for an employer to offer or maintain a pension plan.

Brown says NUPGE’s proposal would create an incentive for employers to provide pension plans.

"They would pay for a workplace pension plan, or pay higher CPP premiums," Brown notes. "Either way, they would be required to meet their moral obligations to their employees."

NUPGE has offered to meet with Denison to discuss the proposal in more detail.

NUPGE

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 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

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