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.

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

Deep Cove Elementary School principal Shelley Hardcastle (right) and vice-principal Mary Kaercher help to restock Reay Creek with fish – in this case, coho fry – after a recent bleach spill killed hundreds of fish. (Wolf Depner/News Staff)
North Saanich’s Deep Cove Elementary School helps to restock Sidney’s Reay Creek

Restocking followed bleach spill that killed hundreds of fish in creek

A new report pegs the annual cost of hiring a third party to monitor use of pickleball courts in North Saanich at $12,000. (Black Press Media file photo).
North Saanich could end up hiring third party to monitor pickleball courts

Other options up for consideration include use of cameras and timed locks

Co-creatorsAdrianna Hatton and Malcolm McKenzie stand next to the little free library revealed Sunday at 9710 First St. (Wolf Depner/News Staff)
Literary crowd helps opens little free library in Sidney

Located at 9710 First St., the book sharing box features original art and reclaimed wood

The barred owl is the most likely to be spotted in the south Island. (Ann Nightingale photo)
Barred owls dominate Greater Victoria owl-scape

Western screech owl population decimated, partly due to barred owls

Between June 1 and 7, 168 net unconditional sales were made for properties in the VREB region. (Black Press Media file photo)
Victoria home sales slightly behind last June’s pace

Benchmark value of single-family home in Greater Victoria tops $1 million

At an outdoor drive-in convocation ceremony, Mount Royal University bestows an honorary Doctor of Laws on Blackfoot Elder and residential school survivor Clarence Wolfleg in Calgary on Tuesday, June 8, 2021. THE CANADIAN PRESS/Jeff McIntosh
‘You didn’t get the best of me’: Residential school survivor gets honorary doctorate

Clarence Wolfleg receives honorary doctorate from Mount Royal University, the highest honour the school gives out

Two-year-old Ivy McLeod laughs while playing with Lucky the puppy outside their Chilliwack home on Thursday, June 10, 2021. (Jenna Hauck/ Chilliwack Progress)
VIDEO: B.C. family finds ‘perfect’ puppy with limb difference for 2-year-old Ivy

Ivy has special bond with Lucky the puppy who was also born with limb difference

A million-dollar ticket was sold to an individual in Vernon from the Lotto Max draw Friday, June 11, 2021. (Photo courtesy of BCLC)
Lottery ticket worth $1 million sold in Vernon

One lucky individual holds one of 20 tickets worth $1 million from Friday’s Lotto Max draw

“65 years, I’ve carried the stories in my mind and live it every day,” says Jack Kruger. (Athena Bonneau)
‘Maybe this time they will listen’: Survivor shares stories from B.C. residential school

Jack Kruger, living in Syilx territory, wasn’t surprised by news of 215 children’s remains found on the grounds of the former Kamloops Indian Residential School

A logging truck carries its load down the Elaho Valley near in Squamish, B.C. in this file photo. THE CANADIAN PRESS/Chuck Stoody
Squamish Nation calls for old-growth logging moratorium in its territory

The nation says 44% of old-growth forests in its 6,900-square kilometre territory are protected while the rest remain at risk

Flowers and cards are left at a makeshift memorial at a monument outside the former Kamloops Indian Residential School to honour the 215 children whose remains are believed to have been discovered buried near the city in Kamloops, B.C., on Monday, May 31, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Pick a Sunday:’ Indigenous leaders ask Catholics to stay home, push for apology

Indigenous leaders are calling on Catholics to stand in solidarity with residential school survivors by not attending church services

“They will never be forgotten, every child matters,” says Sioux Valley Chief Jennifer Bone in a video statement June 1. (Screen grab)
104 ‘potential graves’ detected at site of former residential school in Manitoba

Sioux Valley Dakota Nation working to identify, repatriate students buried near former Brandon residential school

The Queen Victoria statue at the B.C. legislature was splattered with what looks like red paint on Friday. (Nicole Crescenzi/News Staff)
Queen Victoria statue at B.C. legislature vandalized Friday

Statue splattered with red paint by old growth forest proponents

Most Read