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CPP Enhancement Would Work

Tax incentives for retirement savings, workplace defined contribution pension plans, private workplace defined benefit plans, and other voluntary saving schemes are not providing Canadians with retirement savings, says Michael Wolfson, Canada research chair in population health modelling at the University of Ottawa. Paul Moist, national president of the Canadian Union of Public Employees, told the ‘Reform of Canada's Pension System’ session at the Lancaster House ‘1st Annual Pensions Conference’ that 11 million Canadian workers do not have pension plan and if pensions are in decline, that suggests there will be more dependence on social security going forward. And while back in the 1960s when the Canada Pension Plan was launched, it was believed its low level of benefits would be augmented by workplace pensions, he said this hasn't worked out nor has the voluntary savings system (registered retirement savings plans) which mainly appeals to those earning more than $70,000 a year. Bill Morneau, executive chairman of Morneau Shepell, believes demographics make pension reform an important issue and politicians will keep it an issue because older people are more likely to vote. All three said what will work is CPP enhancement. Wolfeson would also maintain Old Age Security and the Guaranteed Income Supplement, increase the age of entitlement, and have thoughtful discussion on retirement saving in Canada. Moist too said CPP enhancement is the best solution and the only issues are the timing and amount. And he doesn't believe it will impair growth as critics have charged. When Paul Martin, the Liberal finance minister, increased the CPP contribution rate in the 1990s, it was argued then that it would increase unemployment and slow growth. Instead, during the five years the increases were phased in, employment and GDP grew. Morneau said CPP enhancement should be considered, but pointed out that to fully fund an enhanced CPP will take a long time to come into play, up to 50 years. In the interim, he said pooled registered pension plans have a place, but they must be mandatory with an opt out. Voluntary does nothing, he said.

Courtesy of Benefits and Pensions Monitor website News Alerts

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