A group of pension experts, including a former chief actuary of the Canada Pension Plan, is calling on Canada’s finance ministers to commit to expanding the CPP.

In an open letter to Finance Minister Jim Flaherty and his provincial and territorial counterparts, the group said a growing body of research indicates that many Canadians will likely have inadequate savings to maintain their standard of living in retirement.

The signatories include Bernard Dussault, the CPP’s former chief actuary; Bob Baldwin, an expert adviser for the Ontario Expert Commission on Pensions; Keith Horner, a pensions consultant and a former federal Finance Department official; Jonathan Rhys Kesselman, the Canada research chair in public finance at Simon Fraser University; Monica Townson, an economic consultant who served on the Pension Commission of Ontario, and Michael Wolfson, the Canada research chair in population health modelling/populomics at the University of Ottawa.

Canada’s finance ministers are to meet in Victoria next week to discuss Ottawa’s proposed pooled registered pension plan framework, the triennial review of the CPP and the state of the economy.

In place of expanding the CPP, Ottawa has tabled legislation on pooled registered pension plans—which has been met with both praise and criticism. Those in favour of the legislation say that it enables small businesses to offer an affordable and easy-to-manage pension plan to their employees. However, critics say Canadians already have similar savings programs, such as registered retirement savings plans and the tax-free savings plan, which aren’t being fully utilized.

Text of open letter

To the Federal, Provincial and Territorial Ministers of Finance:

A growing body of research indicates that many Canadians likely have inadequate savings to maintain standards of living in retirement. Several recent studies project that a significant proportion of middle-income earners risk a nontrivial reduction in their living standards upon retirement.

The vast majority of employed and self-employed Canadians already contribute to the Canada Pension Plan (CPP). The CPP is fully portable and provides a relatively predictable, inflation-indexed, lifetime retirement benefit to millions of Canadians. The CPP enjoys low costs due to its large scale, efficient administration and professional governance, and the Canada Pension Plan Investment Board oversees a diversified and professionally managed fund on behalf of the plan.

The CPP is limited to replacing 25% of average lifetime employment earnings, contributing to the fact that Canada’s publicly administered pensions provide average and above-average income earners with a gross income replacement rate significantly below the OECD average. The average monthly retirement benefit paid by CPP in June 2011 was approximately $510; even receiving the maximum CPP retirement benefit, a single individual in retirement with no other income (beyond Old Age Security) falls well below the income level cutoff for the Guaranteed Income Supplement (GIS), an income-tested program targeting low-income seniors.

We urge the finance ministers to expand the Canada Pension Plan. The CPP offers an already existing administrative structure and framework to improve retirement benefits for working Canadians at relatively low cost. The changes made to the CPP in 1997-1998 demonstrate that contribution rate increases need not lead to employment losses. Prompt action is warranted; should enhancements to the CPP be fully-funded, it is important that improvements be agreed to on a timely basis, as an extended phase-in period will be required.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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