[dropcap letter="S"]ince the initial 2010 decision to implement Pooled Registered Pension Plans (PRPPs), there has been little progress. The federal government has passed the bill enabling the concept but there has been no follow-up enabling legislation from the provinces. The only really constructive moves came from Québec and that stalled following the Liberals loss of power in the September 2012 election. Noises have since been made about the possible revival of the plan by the Parti Québécois but we are still awaiting concrete proposals.
At the December 2012 finance ministers meeting the possibility of increasing the Canada Pension Plan (CPP) and the Québec version (QPP) was revisited having been rejected at the 2010 meeting. This has been in response to clamour from the media and labour sources in particular to follow this route.
On the surface it appears an easy route to increase the amount of money people have in retirement and from the point of view of the workers it appears relatively painless – a small increase in contributions is like a minor tax increase. But leaving aside the effect on employers of increased contributions, it ducks the strategic changes which are being embraced, albeit reluctantly, in most other G20 countries.
Across the globe, governments have come to the realisation that their populations have to take far more responsibility for their own retirement income. Increasing longevity and the reduction in the worker/retiree ratio in all western countries means that projects for government expenditure on retirees for the middle of this century show the provision of pensions to be at levels that are completely unsustainable. Therefore action is being taken in most countries to ensure that individuals defer more of their current spending in order to increase their income level in retirement by limiting government involvement in pensioner support and raising the awareness of citizens that they need to save themselves to top up this modest income level.
This was the thinking that lay behind the PRPP approach; encouraging people to save for their own future ensures that they are involved and take the responsibility on themselves rather than assuming that government and employers will sort out the problem.
Expanding the CPP/QPP system will enable Canadians to duck the issue of taking responsibility for their own retirement for another few years. They will be encouraged to ignore the reality of later retirement on lower income rather than facing the realities that workers in similar western economies are squaring up to. Obviously this will appeal to senior representative organisations and labour groups as it plays well with their base. However, the longer Canadians ignore the sustainability issue, the more radical will the reforms have to be when they eventually come.
Expanding CPP/QPP may undermine the PRPP process and make it far more difficult for future governments to make workers start to take action to provide for their own future. Canadian politicians should be very wary of kicking this can down the road.
What do you think? Let us know in the comments below!
— Scott MacDonald (@scottrmacd) January 28, 2013