Federal and Ontario Finance Ministers Spell Out Visions for Public-Private Pension Reform
After two years in the making, Canada’s Finance Minister, Jim Flaherty, and Ontario’s Finance Minister, Dwight Duncan, have shared their compatible visions for public-private pension reform in letters released to colleagues this month. Both governments are proposing to expand the Canada Pension Plan ("CPP") and amend rules permitting financial institutions to offer pension plans to self-employed people, small businesses and anyone not covered by an occupational pension plan. Minister Flaherty suggests a modest, phased-in, and fully funded enhancement to CPP benefits complemented by changes to federal tax rules and federal and provincial pension standards, which would allow banks and insurance companies the flexibility to offer low-cost pension plans to multiple employers, all types of employees, and the self-employed. Minister Duncan, also wanting to build on the strengths of the CPP, wants to see regulatory changes that would encourage financial institutions to offer low-cost retirement options to the self-employed and small businesses.
Ministers Flaherty and Duncan are not signing on to the suggestion from unions and the NDP to double CPP benefits, instead advocating a more gradual approach that would see a smaller increase in both contributions and payments. Also, the proposals essentially rule out a voluntary supplementary layer to the CPP, an option favoured by the federal Liberals, but criticized for being expensive to set up. According to Flaherty, the changes being advocated "will help enhance retirement savings and pension coverage, without compromising our current system and without passing costs on to future generations."
Minister Duncan said he believes the two-pronged approach will serve as the basis for an agreement that could lead to concrete results soon – perhaps just months away. If provinces and the federal government can agree on broad principles, a task force could be delegated responsibility to figure out the technical details, and then the reforms could be implemented fairly quickly. When Alberta announced in April that it would prefer to study the issue for 10 years rather than embark on a plan to expand the government’s role, it seemed to be a dead end to the talks. Now, though, as several provinces and the federal government wrap up previously-promised public consultations, it seems a sense of urgency is taking hold again. Most of the proposed changes would need to be made by provincial governments, and Minister Duncan said he would proceed in the fall regardless of what the other provinces decide.
For more information, please contact any member of the Pension & Benefits Group.
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