The CBC reported today that Finance Minister Jim Flaherty and provincial financial ministers agreed to consider changes to the Canada Pension Plan as a way to address the problem of Canadians saving too little for retirement.
What’s being considered
- “Modest” increases in CPP benefits.
- The boost to benefits will be “fully funded”, which means either a increase in the employee portion and/or the employer portion of CPP premiums or, far more likely, an increase in the Yearly Maximum Pensionable Earnings (YMPE).
- The changes would be “phased-in” likely in a gradual manner over a number of years.
What’s ruled out
- A doubling in CPP benefits as demanded by the Canadian Labour Congress.
- A supplementary Canada Pension Plan that employees could opt to participate in.
My first preference would have been a supplementary CPP with the option of opting out but it is hard not to favour modest CPP changes that would allow retirees who haven’t saved anything on their own maintain a certain minimum standard of living. Without a plan to address the epidemic of little savings, those who have managed to save diligently will be made to support those who did not through increased taxes. As there are lot more of the spenders than the savers, modest CPP changes are in the best interests of both constituents.