The ORPP is “a harebrained idea,” according to Dr. Jack Mintz, economist and fellow at the University of Calgary.
Speaking at the 2015 Portfolio Management Association of Canada’s National Conference on Tuesday in Toronto, Mintz called the Ontario Retirement Pension Plan “an intrusive plan predicated on the belief that Ontarians do not save enough. There is no evidence that is the general case.”
He said his 2009 literature review for Canadian ministers of finance found that almost 80% of Canadians had adequate retirement income, though he noted single seniors have a poverty rate of about 20%.
Read: What you need to know about the ORPP
And, the ORPP would be expensive to administer. Benefits Canada contributor Joe Nunes also made this point in an August editorial, saying, “Because Ontario is travelling this road alone, there’s no opportunity to leverage the infrastructure the federal government has put in place for the CPP—an infrastructure that allows for collecting and investing contributions as well as determining and paying benefits. […] It takes [at least] $600 million a year to run the CPP.”
Worse, said Mintz, “taxpayers will be on the hook for any pension deficits arising from poor financial returns and future liabilities.” A national pension plan is better, he said, because it spreads the risk across a larger population.
The better solution would be to expand CPP, he argued. To do this, the government government should:
1. Raise pensionable income to $60,000 for a single person, and $120,000 for joint earners. This isn’t much of a stretch: in 2016, the maximum will be $54,900.
2. Raise the replacement income ratio to 35%, from 25%. That would put maximum benefits at $19,000, plus $7,200 from OAS.
3. Raise the spousal benefit to 100%, from 60%.
4. Make CPP/QPP contributions deductible from income, and do not include CPP/QPP in income-tested benefits (i.e., GIS and OAS).
5. Increase GIS for single seniors (a promise the Liberals made in the last election).
6. Raise the CPP eligibility age to 67.
“ORRP is not the right way to go and should be disbanded,” he said. “CPP reform is much more sensible.” And if provinces won’t buy into the plan, he said the government could raise RRSP contribution limits and make CPP contributions tax-deductible without provincial cooperation. He also suggested the government could offer a TFSA investment grant for low-income earners, with a clawback if funds are withdrawn prior to retirement.
Read: Businesses scared of ORPP’s economic impact
One audience member, Mike Philbrick of ReSolve Asset Management, noted in the Q&A that pensions have their merits: “By pooling risk via a pension vehicle, we all need to save less in order to meet our retirement goals,” he tweeted. Further, when he’s making a retirement plan for one person, he must account for a 95% risk of ruin, since that single person bears all investment and inflation risk. When many people join a pension, he said, a manager would only have to plan for a 50% to 55% risk of ruin.
A version of this story originally appeared on the site of our sister publication Advisor.