Canadians don’t support mandatory CPP increases

Forced retirement savings could be a big federal election issue

By Laura Jones

Whether or not Canadians should be forced to save more for retirement is shaping up to be a big federal election issue.

A growing awareness of the massive unfunded liabilities of public-sector pension plans, which tend to be far more generous than those offered in the private sector, has been putting pressure on politicians to do a better job controlling public-sector compensation.

The union response, led by the Canadian Labour Congress (CLC), was to mount a campaign to convince finance ministers across Canada to consider a mandatory increase to the Canadian Pension Plan (CPP).

Pushing for a mandatory CPP increase distracts attention from overly generous public-sector compensation plans.

The CLC was successful at getting a CPP increase on the agenda of a meeting of finance ministers from across Canada in 2010 and subsequently getting some support for increasing CPP from the federal government and many of the provinces.

By 2013, it looked like an increase might have the support it needed to be approved.

At this point, small-business owners really started lighting their hair on fire as it looked like they were headed for a payroll tax increase with no public consultation.

Currently, Canadian employers and employees each pay 4.95 per cent of payroll costs to the existing CPP.

Increasing these costs wasn’t seen as palatable to business owners or their employees.

Survey results from more than 8,000 business owners in 2013 indicated that a mandatory increase in CPP would cause businesses to consider wage freezes and reduce investments in the business.

An Angus Reid public opinion poll confirmed that Canadians agreed with small-business owners that there were better ways for the government to help Canadians save for retirement.

Only 18 per cent felt that introducing a mandatory increase in CPP was the best option, while 54 per cent supported tax relief.

Both business owners and the general public indicated that forcing them to save more for retirement would take money from other important priorities, including, ironically, other ways of saving for retirement.

In December 2013, the issue was temporarily put to bed when former federal finance minister Jim Flaherty declared the time was not right for a CPP increase.

Now, it is back as an election issue with the federal New Democrats, Liberals, and Green Party of Canada all supporting a mandatory CPP increase, while the Conservatives oppose a mandatory increase but would consider allowing Canadians to voluntary increase their CPP contributions.

So it’s a safe bet this will be a hot topic when the premiers get together next month in Newfoundland for the Council of the Federation meeting.

Helping Canadians save for retirement is widely supported.

Forcing them to do it through an increase to a mandated government payroll tax is not.

Laura Jones is Executive Vice President of the Canadian Federation of Independent Business. She can be reached at laura.jones@cfib.ca. Follow her on Twitter @CFIBideas.

 

 

 

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