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

T-Birds make the leap into rugby provincials

Strong first half helps Cowichan beat Belmont Bulldogs

LAKE FLASHBACK: Water troubles and hopes for a full-time theatre take centre stage this week

Lake didn’t want meters, and Youbou didn’t want publicly owned water while Players wanted Brown House

75th Anniversary Run remembers Second World War tragedy on Mount Bolduc

Transport was provided by ATV through the members of Cowichan Valley ATV Club

Chris Wilkinson column: How does showing appreciation make you feel?

How much time and (more importantly) energy do you feel you have left to appreciate someone?

Duncan runner Taryn Smiley reaches NCAA track prelims

Missouri State athlete can qualify for national finals

600 new campsites coming to provincial parks and recreation sites across B.C.

Tourism Minister announced half of the new spots to 13 most popular provincial parks

Coming up in Cowichan: From bike rodeo to ‘A Word About Consent’, lots on the calendar

Christian Science event coming to Duncan Saturday, May 25 “Breaking News: Freedom… Continue reading

B.C. Supreme Court dismisses review around ferry workers’ right to strike

B.C. Ferry and Marine Workers’ Union collective agreement expires November 2020

Municipalities protest after B.C. declares marijuana crops ‘farm use’

UBCM president seeks answers in letter to John Horgan government

CMHC defends mortgage stress test changes amid calls for loosening rules

Uninsured borrowers must now show they could service their mortgage if rates rose two per cent

B.C. woman left ‘black and blue’ after being pushed off 40-foot cliff at lake

West Shore RCMP looking for witnesses as investigation continues

Thunderstorms to bring heavy rain, risk of flash floods in the southern Interior

Ten to 30 millimetres of rain to fall over the early weekend

Unbe-leaf-able: Agassiz man finds more than 200 four-leaf clovers in a month

Walt Hardinge has found more than 219 four-or-more leaf clovers this spring alone

Crews fight fire with fire to keep blaze from northern Alberta town

The wildfire now covers some 920 square kilometres

Most Read