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

Northern Haida Gwaii Hospital to get secure room for psychiatric patients

Cost anticipated at close to $1 million for Masset hospital

Queen Charlotte explores banning single use plastics

Council seeking community input on options to reduce plastic waste

Masset fishing derby proves to be a catch

All ages participated in the competition to bring in the top salmon and halibut hauls

Yarn Bombing mastermind is back in town

Big Canada Day longweekend in the works

New rules prohibit fishing in Haida waters

Strict protection zones will be in effect to preserve resources in the area

VIDEO: Rare white killer whale captured by drone near Campbell River

The transient orca has been named Tl’uk, a Coast Salish word that means ‘moon.’

B.C.-born Carey Price brings young fan to tears at NHL Awards banquet

Anderson Whitehead first met his hockey idol after his mother died of cancer

Licence issue delays boozing while cruising on BC Ferries

Planned June launch for alcohol sales delayed

B.C. school mourns after 13-year-old killed by fallen tree on field trip

Teenager died after being struck and pinned by tree while on a field trip near Sooke

B.C. temporarily halts resource development to protect caribou

The caribou population in northeastern B.C. has dwindled over the last two decades

‘The Fonz’ gives thumbs up in letter to dyslexic students at B.C. school

Students in Maple Ridge reached out to Henry Winkler after reading one his Zipster books.

B.C. teen killed by falling tree near Victoria

Second youth also injured in freak incident during field trip at Camp Barnard near Sooke

Commercial fishers in B.C. now required to wear life-jackets on deck: WorkSafeBC

WorkSafeBC reports 24 work-related deaths in the commercial fishing industry between 2007 and 2018

Most Read