It seems the idea of expanding the Canada Pension Plan doesn’t die easily. The NDP hasn’t let it go, nor has the Ontario government who, with their March 27 budget, reiterated their preference for a “modest, phased-in expansion of CPP” over pooled registered pension plans (PRPPs).

Ontario’s fondness for “big CPP” is understandable: it doesn’t cost the government a penny, the initial burst of enthusiasm for PRPPs seems to have waned everywhere except in Quebec, and pension plan coverage in the private sector is down to just 22% of the workforce. Still, the CPP/QPP can’t change so long as Quebec and Alberta maintain their opposition to expansion—unless the Ontario government knows something we don’t.

Just in case the idea still has legs, here are some reasons to exercise caution. The rest of the developed world, including the U.S., has seen fit to raise the normal retirement age under their social security programs to 67 or 68. We are deluding ourselves if we think Canada will forever be the one holdout with a retirement age of 65. The fact that we are living longer is just one reason for raising the retirement age.

As I pointed out in my last column, Canada has an even more compelling reason to push for later retirement. With our changing demographics, unemployment is dropping quickly. We will have a labour shortage in about 10 years’ time and the only large pool of able-bodied Canadians who will be capable of working (at least on a part-time basis) will be 60-somethings. In fact, in recent years, employment rates among people age 55 and up have been rising steadily. The last thing we want to do is to expand the CPP now and then push back the CPP retirement age 10 years later. Every employer who has to implement a take-away knows the best time to do it is in conjunction with an improvement.

The other problem is that we are learning that DB plans, like the way CPP is currently constituted, don’t really exist. Every apparent DB plan is, in reality, a target benefit plan, in the sense that the sponsor can communicate the benefit they intend to pay but situations may arise—insolvency, financial crises, wars, deflation, oil price shocks—when even the sturdiest sponsor may have difficulty making good on its DB promise. Like target benefit plans, some DB plans may have to cut benefits if the promised benefit proves unaffordable. Unlike target benefit plans, trimming benefits under a DB plan is politically and legally difficult if there are no rules communicated in advance as to how it will be done.

Pension plans can be likened to trees. Traditional DB plans are like deciduous trees, which can thrive under the right conditions, but lack flexibility and can snap like twigs under hurricane conditions. Target benefit plans are like palm trees that will bend with the wind and not break.

If the CPP is to be expanded, we should decide first how our normal retirement age is evolving. The recent change pushing back retirement for OAS purposes to 67 provides a pretty good idea. We should also decide if the CPP benefit promise should be recast more formally as a target benefit promise rather than pure DB. The bigger the plan, the more important this will be.

Moving the normal retirement age under the CPP/QPP to 67 and turning the plan into a target benefit plan will no doubt be unpopular moves, but they will be easier to do if they are accompanied by an expansion of the benefit. Maybe the current hiatus—while we see whether PRPPs will work and while Quebec and Alberta figure out what they really want—may work in our favour, if it gives us time to reach a consensus on the long-term direction of big CPP.

Copyright © 2021 Transcontinental Media G.P. Originally published on

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thomas deuling:

I am a person that is just 62 years old. I was injured in a job site situation approximately 4 years ago. I have been fighting the WCB for a long time. To no avail, I have received nothing from them. I am happy they don’t move the retirement age upto 67 because I have been working for 45 years to wait longer to get something is absurd. I need it now. .

Tuesday, June 05 at 7:36 pm | Reply

Mike Murphy:

I think most people and provinces would be opened to the idea of wording in an improved CPP/QPP to allow for times when the promised payments can’t be met. As Fred says; to make the plan more flexible like a palm tree to weather financial storms. Increasing the age of retirement can wait. We already have enhancements to encourage people to continue working longer. As for PRPP’s, they just won’t fill the gap needed to give a decent retirement pension to most of Canada’s workers. We need improvements to CPP now.

Wednesday, June 06 at 7:14 am | Reply


Ontario is very correct. The Conservatives will stop at nothing short of turning the whole CPP over to private companies!

To do this they must destabilize the account and cause dissent in the population. Then, they offer the cure, privatize it.They are quite up to this task.

Wednesday, June 06 at 10:47 am | Reply

Bruce Kennedy:

Mr. Vettese argues that we need to do to things: raise the CPP retirement age (primarily for labour force reasons), and make the CPP a target benefit plan with an explicit benefit adjustment arrangement.

The CPP did become a target benefit plan in 1997, and there is an explicit adjustment formula in effect. It’s called the automatic balancing mechanism (ABM).

The CPP also did move away from a fixed retirement age of 65 to implement retirement-age-neutral adjustments to retirements at any age from 60 to 70. The whole point of the retirement-age-neutral adjustment factors is to ensure that the CPP does not create incentives that would interfere with future desired labour force behaviours.

Both of Mr. Vettese’s problems have already been solved.

Wednesday, June 06 at 11:41 am | Reply

Fred Vettese:

The CPP does indeed have an automatic balancing mechanism – the trouble is, it’s not automatic. I’m quoting the chief actuary of the CPP in saying this. As for normal retirement age, it is clearly 65 under the CPP because that is the age assumed by the 25% formula. Of course, there is a range of retirement ages 60 – 70 but that is not the same as saying normal retirement is at 67; it’s not.

Wednesday, June 06 at 3:08 pm

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