BC VIEWS: The state rescues your retirement (with VIDEO)

Liberals' expansion of Canada Pension Plan is modest, but it comes at a price and discourages individual responsibility

Ontario Premier Kathleen Wynne campaigns with soon-to-be federal finance minister Bill Morneau in Toronto last fall.

The Justin Trudeau government has declared a pension crisis, and is imposing its solution.

After the Ontario government threatened to press ahead with its own Quebec-style provincial pension plan, the Ottawa head office of the Liberal Party stepped in. Finance Minister Bill Morneau called a meeting of provincial ministers in June, and they lined up to support his intention to expand the Canada Pension Plan starting in 2019.

Perhaps still haunted by the leap to the harmonized sales tax, B.C. Finance Minister Mike de Jong broke from the herd ever so slightly, declaring a consultation period first. Premier Christy Clark hinted that this was a formality, since she is focused on cordial relations with Ottawa. B.C.’s rubber stamp could come any day.

Morneau’s CPP expansion plan sounds quite modest. Employer and employee payroll contributions are to go up from the current 4.95 per cent of earnings to 5.95 per cent by 2023. For each employee earning $54,900, the employer contribution goes up $7 to $8 per month in each of the first five years of the phase-in.

The goal is that by 2025, CPP will cover a third of earnings rather than a quarter as it does today.

Morneau is concerned about the decline in private pension plans, and sees it as the state’s job to step in. The days of bond investments earning seven per cent interest are gone, and even public sector employers are starting to look at defined-contribution pension plans where the payout depends on investment returns.

(See the horrified response of the post office union to the idea that a guaranteed pension isn’t their God-given right.)

For private sector employees, defined-benefit pensions are mostly a distant memory, if they have an employer pension at all. Many join self-employed people who are expected to manage their own RRSPs and tax-free savings accounts, which were curtailed by the incoming Trudeau government.

The Liberal philosophy is to discourage individual responsibility and increase state control.

De Jong gave an upbeat assessment of B.C.’s public sector pensions in his recent report on the public accounts. Unlike basket-case provinces such as Quebec (50 per cent unfunded liability) and Alberta (76 per cent unfunded), B.C. is 97 per cent funded.

The B.C. teachers’ pension plan has an unfunded liability of $244 million, which is projected to be covered by 2019 through increased employee and employer contributions. Of course the employers are school districts, funded by taxpayers. B.C.’s municipal pension plan also has an unfunded liability.

So if you are a self-employed person trying to sock away retirement funds on your own, you can be comforted by the fact that you’ll be chipping in a bit extra for teachers and municipal employees to maintain their guaranteed pensions.

And if you’re a small business owner, you’re looking at an extra $40 a month for each employee for CPP. According to a survey released last week by the Canadian Federation of Independent Business, some employers will have to forgo other benefits. Some expect to freeze or even cut wages. Some expect layoffs.

The CFIB survey found low public awareness of all of this. Polling company Ipsos found almost 40 per cent of Canadians think the government pays for part of CPP. More than 70 per cent are unaware that current retirees get nothing from the CPP expansion.

The Fraser Institute ran the numbers on CPP deductions compared to Morneau’s middle class tax cut. When the CPP expansion is done, that $54,900-a-year employee will see a net decrease of $374 in take-home pay.

Tom Fletcher is B.C. legislature reporter and columnist for Black Press. Email: tfletcher@blackpress.ca Twitter: @tomfletcherbc

Just Posted

Babine Forest Product’s fine appeal not successful

The company has been ordered to pay the $1.01 million fine

CIHI: overuse of antibiotics in Canada

More than 25 million courses of antibiotics prescribed in 2015

UNBC professor’s study links pot and testicular cancer

Cannabis use may facilitate later onset of testicular cancer

B.C. VIEWS: Dam decision a big test for NDP

Alternatives to completing Site C not pleasant for John Horgan

VIDEO: Government approves funding of $750,000 drug for B.C. woman

Approval comes one day after province announces funding for Soliris on a case-by-case basis

VIDEO: Rare comic showing Superman’s 1st appearance to be auctioned

The 1938 comic features Superman hoisting a car over his head

An adopted cat is the best 10 pounds you’ll gain this season

BC SPCA encouraging families to add a forever feline friend during adoption event Nov. 24 to Dec. 3

Uber official says public needs to push for ridesharing in B.C.

Mike van Hemmen tells Kelowna Chamber of commerce ridesharing would be ‘win-win-win’

B.C. co-ops relieved with Ottawa’s housing strategy

Federal government to have a new co-operative housing funding model in place by 2020

B.C. NDP referendum plan sparks legislature battle

David Eby says public will decide on proportional referendum

Hammy has been freed of his threads, a purple antler remains

The iconic Prince Rupert buck with a piece of hammock attached to his antlers was caught by COs

Court adjourned again for man linked to Shuswap farm where human remains found

Curtis Sagmoen will appear back in court on Dec. 14

B.C. family advocating for drug decriminalization following death of son

Federal NDP leader Jagmeet Singh has noted the New Democrats would decriminalize personal possession of all drugs

Winning Lotto 6/49 purchased in Kelowna

Some lucky man or woman purchased a winning 6/49 ticket in Kelowna.

Most Read