The Canadian Institute of Actuaries has published a public position on the potential expansion of the Canada and Quebec Pension Plans, including a modest benefit increase, equal employer and employee contributions, and a renewed debate about the country’s retirement age.
Finance ministers from across Canada are meeting June 19-20 in Vancouver to discuss CPP reforms, a development that comes against the backdrop of the passing of the Ontario Retirement Pension Plan act and the federal government’s proposed changes that would restore the eligibility age for old-age security and guaranteed income supplement benefits to 65.
Read: Finance ministers schedule meeting to discuss CPP reform
Read: Ontario passes ORPP bill
Read: Changes to OAS and GIS benefits confirmed
“In the midst of all of this, there is a sense that an expansion of public pension plans is possible,” said Robert H. Stapleford, president of the Canadian Institute of Actuaries, in a news release. “In the public interest, we have developed design elements that target middle-income earners, while protecting the long-term sustainability and fairness of an expanded [CPP/QPP].”
The key design elements suggested by the Canadian Institute of Actuaries are:
- Benefit formula and covered earnings: Set a 15 per cent pension target after a full career, based on indexed average earnings above a minimum earnings threshold. Set the minimum covered earnings at 50 per cent of the year’s maximum pensionable earnings and the maximum covered earnings at 150 per cent of the year’s maximum pensionable earnings.
- Contributions: Set equal employee and employer contributions and consider staggered contribution rates based on age to minimize generational transfers.
- Benefit features: Fully fund those new benefits by providing gradual pension accruals, and adjust indexing if necessary so that this new plan remains self-sufficient.
- Administration: Use the CPP/QPP existing structures for collecting contributions, for administering benefits and for investment functions.
- Retirement age: A needed debate on whether the retirement age under public plans should be adjusted, cannot be concluded in 2016, according to the Canadian Institute of Actuaries. Instead, it suggests the issue of retirement age be addressed before the effective implementation date of any CPP/QPP expansion.
“Our document provides analysis, background and suggestions to help decision-makers deliver a national, targeted expansion of the Canada and Quebec Pension Plans with a modest benefit increase. Such an opportunity to ensure that Canada’s retirement system meets the needs of future retirees does not come around very often.”
The Canadian Institute of Actuaries says finance ministers are due to make key decisions about CPP/QPP reform in December 2016.
Read: Bill Morneau on CPP reform, the ORPP and future tax changes