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

Work continues to deal with flooding

Increased efforts to mitigate flooding at Sportsmens Bowl and downstream

Reel Reviews: Parlour games or video games

We say, “Rampage is silly fun and Truth or Dare is just silly”

Look back to simpler summers

Rotary honourees reminisce about South Okanagan summers

Okanagan-Similkameen freshet looms large: district

Regional District of Okanagan-Similkameen says property owners have window to prepare for flooding

Final week for ALR input

Public consultation process closes April 30

REPLAY: B.C. this week in video

In case you missed it, here’s a look at replay-worthy highlights from across the province this week

Low fog creates stunning views near Sicamous

Motorists on the highway between Salmon Arm and Sicamous were treated to spectacular scenery.

Dix says B.C. remains focused on fighting youth overdoses in wake of teen’s death

Elliot Eurchuk’s parents say he died at his Oak Bay home after taking street drugs

‘When everybody leaves: Counselling key to help Humboldt move on after bus crash

Dealing with life after a tragedy can be the worst part following a loss

Half-naked shooter guns down four, runs away in Nashville Waffle House shooting

Nashville police say they are looking for Travis Reinking in connection with the shooting

Child’s body found in river downstream from where boy went missing during flood

Three-year-old Kaden Young was swept out of his mother’s arms in February

B.C. VIEWS: Eliminating efficiency for farm workers

Don’t worry, NDP says, the B.C. economy’s booming

Penticton students tackle dark themes in Oliver

Penticton Secondary School’s theatre program brings to the stage Oliver

Kamloops RCMP respond to report of dead body floating in Thompson River

Body has not been located, searches to continue as river conditions improve

Most Read