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

GALLERY: Fernie hosts mine rescue competition

Fording River, Line Creek mine rescue teams off to provincials after placing first and second

Fernie beer named Canada’s best pale ale

Fernie Brewing Company’s Campout West Coast Pale finishes first at the Canadian Brewing Awards

Cannabis yoga a budding trend in Fernie

Yoga studio, cannabis educator team up to offer Fernie’s first cannabis yoga classes from May 17

Sparwood’s Momma Di a mother to many

The Free Press competition winner revealed; plus Mother’s Day around the Valley

An Everest fundraiser

Man set to climb elevation of Mt. Everest in one day to raise school lunch funds

UPDATE: B.C. pilot killed in Honduras plane crash

The crash happened in the Roatan Islands area, according to officials

UPDATE: Aggressive coyote moves to Sparwood

Residents urged not to feed or approach the animal

City of Fernie to hold referendum for multi-purpose centre loan

Council opts for assent voting after petition calling for a referendum garners over 500 signatures

‘Teams that win are tight’: B.C. Lions search for chemistry at training camp

The Lions added more than 50 new faces over the off-season, from coaching staff to key players

Rescue crews suspend search for Okanagan kayaker missing for three days

71-year-old Zygmunt Janiewicz was reported missing Friday

B.C. VIEWS: Reality of our plastic recycling routine exposed

Turns out dear old China wasn’t doing such a great job

Carbon dioxide at highest levels for over 2.5 million years, expert warns of 100 years of disruption

CO2 levels rising rapidly, now higher than at any point in humanity’s history

B.C. ferry stops to let black bear swim past near Nanaimo

Queen of Oak Bay brakes for wildlife in Nanaimo’s Departure Bay

Mother dead, child in critical condition after carbon monoxide poisoning at Shuswap campground

The woman was found unresponsive insider her tent and the youth was taken via air ambulance to hospital

Most Read