The re-election of Ontario Premier Kathleen Wynne and her Liberal government has brought pension reform to the top of Canada's national agenda. Premier Wynne is pressing ahead with a Canada Pension Plan top-up for Ontario workers since the federal government is unwilling to meet the need for pension reform. Finance Minister Joe Oliver and the federal government should seek agreement with the provinces on a timetable for CPP expansion.
Premier Wynne proposed the Ontario pension plan in her minority government's May budget. When the opposition parties rejected her policy, she called an election, won a majority and presented the same budget to the legislature once again July 14.
The proposed pension plan would apply to workers who are not covered by a company pension plan. Workers would be required to contribute 1.9 per cent of their earnings, matched by the employer, to a government pension fund and would draw benefits of around $10,000 a year, depending on earnings, after retirement at age 65.
Only about one-third of employed people in Ontario, as in the rest of Canada, are covered by a company pension. The rest must rely on the Canada Pension, Old Age Security and their private savings to finance their retirement years.
Experience has shown most such people have no private savings to speak of. Many of them will suffer a sharp drop in income when they retire. If retirement saving by middle-income and lower-income working people does not increase, a future government will have to use tax money to improve their incomes through Old Age Security or another similar vehicle.
The Harper government, averse to expanding the Canada Pension Plan, wants to pave the way for a new kind of defined contribution pension plan that employers in the federal labour jurisdiction could offer their workers. This, however, will have no effect on the much larger number of workers in the provincial labour jurisdiction. Nor will it benefit people whose employers prefer not to offer a company pension.
The Ontario solution will meet the need for a great many Ontario workers, but it will impede labour mobility in Canada. One great advantage of the Canada and Quebec Pension plans is that an employed person can move to another province with no loss of pension. If Ontario and a few other provinces create local top-up public plans, families will be reluctant to move where the jobs are for fear of losing pension benefits.
Mr. Oliver had said this was not the time to impose a new tax on businesses by requiring them to make pension contributions. He did not quarrel with the logic of expanding the Canada Pension Plan, but not just now. The Ontario election showed, however, the time for pension reform has come. The issue was put squarely to Ontario voters and they emphatically re-elected the Wynne government.
Ontario has started work on its local top-up plan so as to start receiving contributions in 2017. Mr. Oliver should sit down with Ontario and the other provinces and seek agreement on a target date for Canada-wide pension reform. If Mr. Oliver has a better idea than expansion of the Canada Pension Plan, he should bring it forward for study. If he has a better target date than 2017, he should let the country know what it is.
The logic of pension reform is well understood across Canada. If the federal government continues to obstruct expansion of the Canada Pension Plan, Ontario will go its own way, other provinces may follow suit and Canadians will lose the nationwide portability of pension coverage that they have enjoyed for nearly half a century. Mr. Oliver, supported by his Ontario Conservative allies, made the case against pension reform in the context of the Ontario election and they lost the argument. He should come to the table and talk.