Flaherty, provinces reach CPP consensus

Finance Minister Jim Flaherty and his provincial counterparts have agreed to work toward increasing Canada Pension Plan payments and contributions.

Provinces agree to work toward raising payouts

Finance Minister Jim Flaherty and his provincial counterparts have agreed to work toward increasing Canada Pension Plan payments and contributions.

Finance Minister Jim Flaherty says increases to the Canada Pension Plan would be modest and phased in. ((CBC))

"We agreed to consider a modest phased-in and fully funded enhancement to defined benefits under the Canada Pension Plan," Flaherty said at a news conference in P.E.I. on Monday.

Flaherty was meeting with finance ministers regarding numerous reforms to Canada's retirement income, the subject of much discussion over the last 18 months.

Though still far from agreeing on implementation, the ministers reached "consensus," Flaherty said, that a modest increase in the plan would be the best course of action.

"A couple of ministers need to go back to their governments to have further discussions on that option, but we are going to go ahead and mandate our senior officials to work collaboratively on technical and implementation issues … and to complete this work by the fall," Flaherty said.

He offered no timetable of action, and indeed stopped well short of a guarantee that an increase in CPP payouts and contributions is a sure thing.

"There’s a lot of work to be done," he said. 

"You know, what does modest mean? How do we go about doing this? Our officials have been tasked with that job."

Flaherty ruled out one option suggested for Canada's retirement income system —  a government-sponsored, voluntary supplementary plan that would have functioned much like an RRSP.

"We decided to take [that] off the table," he said.

Growing concern

The issue of retirement income has gained prominence this year, with numerous banks sounding the alarm that current trends in retirement savings will not sustain Canadians' expected lifestyles. The problem was exacerbated by the high-profile bankruptcies of several companies through 2009, all of which left pensioners in the lurch.

About 125 people staged a peaceful demonstration outside the golf and beach resort in Lakeside where the ministers were meeting.

Larry Brown, secretary-treasurer of the National Union of Public and General Employees, said about one-third of Canadians are retiring with only CPP and Old Age Security benefits, which amount to about $17,000 a year.

"That's poverty-level retirement wages," he said.  "At least a third of Canadians, maybe more, that's essentially all they have to retire on, is that very low level of income. That's a crisis that's not looming; it's already on us."

Auto industry pensioners rallied in April 2009 to convince governments to back their pensions, which were then under threat from the economic crisis. ((Nathan Denette/Canadian Press))

The Canada Pension Plan is administered by the federal government and all the provinces and territories jointly, so two-thirds of provinces representing about 67 per cent of Canada's population would have to agree in order to change CPP payout or contribution levels.

A poll released Monday suggested almost half of Canadians near retirement feel they are not financially prepared to live comfortably after they leave the workforce.

An Ipsos Reid survey commissioned by the Canadian Institute of Actuaries found 42 per cent of respondents over the age of 45 described themselves as "not prepared" for retirement.

Seventy-two per cent said they were concerned about maintaining a reasonable standard of living in retirement.

The poll was a telephone survey of 2,137 Canadians who are above the age of 45 but not yet retired. It was conducted between Feb. 4 and 10, 2010 — right in the middle of Flaherty's cross-country pension consultation tour — and the margin of error was plus or minus three per cent, 19 times out of 20.