The Canada Pension Plan
Part 1 – Past and Present
The June 20, 2016 announcement by Finance Minister Bill Morneau of an expansion in the Canada Pension Plan heralds the most significant change in Canada’s 3-pillar retirement income system in half a century. The question is whether it is a change for the better. And will it put an end to the long-running debate on pension reform?
In recent years, politicians, unions and special interest groups have clamoured for an expansion of the Canada Pension Plan (CPP). Without it, they say, younger Canadians face a retirement crisis, and it is up to government to make things right. The Ontario government injected a sense of urgency to the reform process when they declared they would proceed to launch their own state pension plan (the ORPP) by January 2018 if a consensus on CPP expansion was not reached by year-end.
To complicate matters, not everyone agrees there is a crisis or with the proposed remedy. The former Conservative government, for instance, opposed CPP expansion on the grounds that the economy was too fragile. Business groups agree, and add that the extra payroll taxes will result in lost jobs. Then there is the age-old controversy of how much government intervention is appropriate. Would CPP expansion create a moral hazard by diluting the natural inclination to save and does it encroach too much on private-sector solutions?
This Morneau Shepell special report provides our perspective on the proposed changes to the CPP. In the process, we revisit the circumstances surrounding the birth of the CPP a little over half a century ago and how the situation has evolved since then. The history is not only interesting; it provides a better context from which to assess the events that are now unfolding.