By Stephen Gordon - Wednesday, January 9, 2013 - 0 Comments
There are any number of proposals to “reform” Canada’s pension system. Some may be good ideas, some may be less than good. But before we can evaluate the relative merits of a given set of pension proposals, we have to articulate the question: what, precisely, is the problem these reforms are meant to solve?
The original goal of the CPP/QPP was to solve the once-pervasive problem of elderly poverty—and it was largely successful at that. As UBC economics professor Kevin Milligan notes, elderly poverty declined sharply after the implementation of the CPP/QPP. In all of the measures produced in this Statistics Canada table, the incidence of poverty among the elderly is significantly less than among the non-elderly.
People save for retirement for the same reason that they take on debt when they are young: they are rearranging income across time in order to maintain a stable level of consumption throughout their lives. Capital markets are the mechanism with which income is shifted across time: current income is deferred to the future by saving, and future income is brought to the present by borrowing. If everything worked according to the simplest form of the standard life-cycle model of savings and expenditures, retirement would be characterised by a smooth transition from labour income to investment income that allowed people to maintain the same standard of living. In practice, of course, this doesn’t happen: capital markets are not perfectly frictionless, and people don’t always have access to all relevant information when making their savings and investment decisions. That’s why retirement is generally associated with a reduction in disposable income. The policy challenge is to make the transition less abrupt.
By The Canadian Press - Sunday, December 16, 2012 at 8:09 PM - 0 Comments
OTTAWA – Canada’s fragile economy, deficits and pension reform — and possibly smoothing over…
OTTAWA – Canada’s fragile economy, deficits and pension reform — and possibly smoothing over ruffled feathers — top the list of issues confronting federal and provincial finance ministers meeting in Ottawa today and Monday.
The last time the ministers got together a year ago, Finance Minister Jim Flaherty angered many of his provincial counterparts by announcing he was unilaterally imposing cuts to future health transfers.
This time the minister says he is making no substantive changes to any of the federal programs, although some disgruntled provinces are likely to ask for a better shake.
The most contentious issue will likely be pension reform — the key topic two years back — with Ontario again pushing for an expansion of the Canada Pension Plan.
Ottawa is expected to place several plans on the table for discussion, but not for implementation.
On Sunday, Ontario Finance Minister Dwight Duncan said Ottawa should move again on CPP reform even without unanimity — something Flaherty has said he wants before progressing on the issue.
Duncan said he believed there was enough support from two thirds of the provinces representing two thirds of the population to expand CPP.
On Friday, Flaherty told reporters the economy should be the top priority and that it is too weak to contemplate boosting CPP benefits at this time because employers would have to pay higher premiums.
“This is not the time to put another burden on employers and dampen employment prospects of Canadians,” he said, adding that such a proposal would make much more sense once the economy has recovered fully.
That’s also the view of Saskatchewan Finance Minister Ken Krawetz, who said while he might support modest tweaks, any “radical changes” to CPP are out of the question.
Two years ago, when enriching CPP was under active consideration, the weak economy and the opposition of Alberta and Quebec were cited by Ottawa for withdrawing its support for the idea.
In its place, Ottawa proposed a voluntary program whereby employees in small and medium firms can voluntarily pool savings — although employers are not obliged to contribute.
Federal legislation for the so-called Registered Pooled Pension Plan concept was officially enacted Friday, but it still requires the provinces to put it into practice.
A spokesperson for Duncan says Ontario will not implement the pooled plans unless there is also “enhancement” of the CPP.
New Democrats and the Canadian Labour Congress have proposed doubling what CPP would pay out over a seven-year period to $1,868 a month.
Flaherty said he would not act unless the decision is unanimous, even though technically he only needs two-thirds of provinces representing two-thirds of Canada’s population to be on side.
The federal minister also indicated that he will be discussing the fragility of the U.S. economy, and how Canadian governments will need to work together if the “fiscal cliff” fears materialize, and the combination of tax hikes and spending cuts in the United States drives not just the U.S. but also Canada into a recession.
In an interview Sunday with CTV’s Question Period, Flaherty he has high hopes that American leaders will sidestep the cliff with a short-term temporary fix, buying some time to find a permanent solution.
“I hope that January, February, they’ll sort it out…..There has been some progress. So I’m hopeful that they’ll at least patch it, for the new year, and then move on to a genuine solution for the long term,” Flaherty said.
He said he will be speaking with the provincial ministers about what they could do together, just in case.
“The federation does tend to pull together — particularly the finance ministers because we all deal with the numbers — when times get tough. I’m not anticipating the need to do this. I’m hoping the Americans will see the light.”
On domestic issues, however, there is unlikely to be much harmony in the way the governments view equalization and transfer payments.
While Flaherty said there would only be technical changes to equalization and transfers, some of the provinces still want that topic on the table.
A spokesman for Quebec’s finance minister, Nicolas Marceau, said the province’s key objective is ensuring it gets its fair share of transfer payments.
Ontario has also long maintained that it is getting short-changed.
Last week, the Ontario Chamber of Commerce called on Duncan to get his “elbows out” and demand better treatment, arguing that in the last decade or so, Ontario contributed $20 billion more to the employment insurance program alone than its residents received in return.
“The bottom line is we pay $12.3 billion (annually) into the federation (more) than we take out of it, that’s the bottom line,” said Allan O’Dette, the chamber’s president.
Flaherty says his top priority is to ensure that all governments stay on track toward eliminating deficits. He noted that Ontario and Quebec still have massive budget deficit problems, and that British Columbia’s debt rating was recently downgraded from stable to negative by Moody’s.
“This is not a lecturing thing from the federal government. This is saying we are all in this together,” he said.
“If one of our provincial governments were to get into serious interest rate increases because of downgrading … obviously the place to go is to the federal government for assistance.”
By Erica Alini - Thursday, February 9, 2012 at 2:48 PM - 0 Comments
According to how economists have long imagined us, the way we plan for retirement works somewhat like this:
- Phase one: straight out of school, we calculate how much money we’re going to need after our working days are over, and lay down a carefully thought-out savings plan;
- Phase two: as we climb the corporate ladder, we’re happily shaving larger and larger slices off our paycheques, pouring the cash into carefully selected and closely monitored investments;
- Phase three: we bid good-bye to our fellow co-workers of a lifetime and joyfully retire to freedom sixty-…. whatever.
By Aaron Wherry - Monday, April 4, 2011 at 5:16 PM - 0 Comments
Jack Layton promises pension reform.
To remedy this issue, Layton said an elected NDP government would immediately work with the provinces to double CPP and QPP benefits. But he would allow Canadians to “prop up” their CPP savings with their personal income … The NDP believes that doubling CPP and QPP benefits could require a 2.5 per cent increase in payroll deductions. Layton also pledged to add $700 million to the Guaranteed Income Supplement (GIS) to help out seniors in the lowest income brackets.
By Paul Wells - Friday, February 26, 2010 at 9:00 AM - 116 Comments
Prorogation allowed Ignatieff to see through the fog of his foibles and find his vision
So where were we? Ah yes. “It being 8:03 p.m.,” acting speaker Barry Devolin told the Commons on Dec. 10, “pursuant to an order made earlier today, the House stands adjourned until Monday, Jan. 25, 2010, at 11 a.m., pursuant to Standing Orders 28(2) and 24(1).
Devolin believed that to be true when he spoke. But 20 days later the Governor General prorogued the second session of the 40th Parliament, so your MPs are going to try it all over again when they return for the third session on March 3.
A lot has happened since then. It’s been a while since I threw a bunch of polling numbers at you, so maybe you’ll indulge me today. Before Christmas I interviewed one of Michael Ignatieff’s new helpers who had moved into the Office of the Leader of the Opposition along with the Liberal boss’s new chief of staff, Peter Donolo. This person said the Liberals’ immediate goal was to move to within a point or two of the Conservatives by spring. I nodded politely. Good luck with that.
By Aaron Wherry - Monday, February 15, 2010 at 3:51 PM - 13 Comments
Apparently in response to a request from the Prime Minister, Michael Ignatieff writes to inform Mr. Harper of all the issues the Liberals would be keen to work on when Parliament resumes, including cap-and-trade, pension reform, pay equity, government oversight, mental health, maternal health, veterans, prorogation and Afghan detainees.
By John Geddes - Wednesday, December 9, 2009 at 9:26 AM - 18 Comments
Patterns in politics are obviously more revealing than isolated actions. When Michael Ignatieff decided last week to throw Liberal support behind harmonizing provincial sales taxes in B.C. and Ontario with the federal GST, it was merely an interesting event. Combine that risky political move with yesterday’s proposal from Ignatieff on pension reform, however, and you’ve got the beginnings of something that deserves closer attention.
By Aaron Wherry - Monday, October 26, 2009 at 12:06 PM - 11 Comments
Peter MacKay, responding to opposition questions, October 19. I will note that when it comes to Bloc members, I wish they would spend just as much time standing up and protecting the interests of Canadian soldiers as they do for the vigour they seem to have for Taliban prisoners … The member has now asked, I believe, nine or ten questions on the Military Police Complaints Commission. I only wish he would bring that type of enthusiasm to support the men and women of the Canadian Forces.
Winnipeg Free Press, yesterday. A former member of Canada’s military says if Prime Minister Stephen Harper truly supports his troops, he’d change his government’s stance on a private member’s bill to improve the pension plans of the military and RCMP. Fred Newton, a 20-year veteran of the military in the communications branch, is one of hundreds of former military and RCMP officers pushing the Conservatives to help pass Bill C-201, a private member’s bill from NDP MP Peter Stoffer … ”You see Prime Minister Harper all the time saying we’ve got to support our troops and then (the Conservatives) go and turn around and vote against this,” said Newton. “It’s hypocritical.”
By Aaron Wherry - Thursday, October 22, 2009 at 1:11 PM - 59 Comments
Jack Layton talks pension reform.
NDP Leader Jack Layton is proposing a national pension insurance program to protect workers whose companies go bankrupt and leave retired employees in the lurch. The self-sustaining program would be funded by employer contributions and guarantee pensioners $2,500 per month in the event their plan is wound up.
Layton says other countries, including the United States and the Netherlands, have similar programs that adopt so-called orphaned pension plans. The NDP is also proposing an increase to the Guaranteed Income Supplement for low-income seniors – a measure that would cost the federal treasury about $700 million a year.