As the country’s finance ministers prepare to consider options for a modest expansion of the Canada and Quebec Pension Plans (C/QPP), a new study makes the case that unless policy-makers are willing to think outside the box, these reforms will be of little help to the next wave of retirees.

The Institute for Research on Public Policy study, Not-So-Modest Options for Expanding the CPP/QPP, finds that current proposals—which assume that any future benefit enhancement must be fully funded and, as such, would be phased in over a period of nearly half a century—will not address the projected gaps in retirement income.

“Approximately half of middle-income earners over age 40 today are expected to see a significant decline in their standard of living upon retirement,” says Michael Wolfson, author of the report and the former assistant chief statistician with Statistics Canada. “A half-century solution won’t help them that much.”

He argues that a so-called “grand bargain”—which would enhance public pension benefits while delaying the age at when they commence—could be the best way to proceed.

Wolfson finds that if the age of eligibility for the C/QPP enhancement was raised to between 68 and 70 (this would not affect existing benefits), it would be possible to phase in new benefits over 20 years, maintain a solvent pension fund with stable contribution rates over the long term, and adjust benefits to compensate for shorter-than-average life expectancy among lower-income earners.

His proposal would double the year’s maximum pensionable earnings from $51,100 to $102,200, and it would increase the income replacement rate from 25% to 40% on earnings above $25,550. It would also reduce the proportion of middle-income earners now facing a significant decline in their post-retirement standard of living by one-quarter.

Wolfson says these reforms would secure the retirement income prospects of a large cross-section of Canadians and also encourage workers to remain in the labour force longer.

This would contribute to increased levels of future consumption, higher tax revenues and lower government spending on income support programs such as old age security and the Guaranteed Income Supplement.

“The options in this analysis provide crucial evidence supporting the kind of public debate that is needed if we are to get it right on pension reform,” he says.

To read the report, visit the institute’s website.

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

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peter benedek:

With the rapid extinction of private sector DB plans, a pure longevity insurance payout option for the CPP would go a long way to deal with retirees’ longevity risk exposure.

Thursday, July 18 at 4:36 am | Reply

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