How changes to the CPP could affect employees

OTTAWA – Kent Peterson would forgive anyone who might think he’s got nothing to worry about when it comes to his retirement — or, for that matter, what happens to the Canada Pension Plan.

After all, the 27-year-old has a unionized, full-time job with the Saskatchewan Federation of Labour. Most folks would likely assume he has a robust workplace pension plan to help him save for his golden years.

Except he doesn’t.

“I’m relying solely on the CPP,” Peterson admitted in an interview. “I’ve envisioned my retirement, and it’s not happy and rosy, to be honest with you.”

Peterson will be watching the outcome of meetings Sunday night and Monday as the country’s finance ministers try to hammer out a preliminary agreement on an expanded Canada Pension Plan — one that’s likely to include higher benefits and an increase in the premiums that come off the paycheques of workers.

One central issue: whether to impose an across-the-board change on all workers and employers, or to more selectively target those Canadian workers who are the least likely to save.

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Federal research has suggested the latter group tends to be under the age of 30, earns between $55,000 and $75,000 (although some estimates are higher), and either doesn’t save enough or lacks access to a workplace pension plan.

The federal and provincial governments are looking at a possible increase in the $55,000 cap on annual maximum pensionable earnings, which would result in both higher premiums and increased pension benefits.

Don Drummond, a professor of policy studies at Queen’s University in Kingston, Ont., said he believes the current cap is too low.

Quebec and Ontario, which together hold the most political heft in the negotiations, walked into talks looking for a targeted approach. B.C., too, wants changes to CPP that would help middle-income earners who don’t save enough.

“They either don’t save as most Canadians have … or they really can’t afford to save enough to pay the difference in terms of their retirement income,” said Susan Eng, counsel to the National Pensioners Federation.

As a young member of the workforce, Peterson’s finances don’t give him a lot of leeway to save, he said.

Nor do his expenses: student debt of more than $50,000 — the legacy of undergraduate and graduate degrees from the University of Saskatchewan — as well as housing, food, utilities and transportation expenses.

“I’m sorry, but there’s no skimping and saving I can do per month that would equal a secure retirement,” he said. “It just isn’t there.”

Public opinion research work conducted by the federal Finance Department last year suggests a great many people in their 30s and 40s don’t expect the Canada Pension Plan to be of much help in their retirement.

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Other research suggests about two-thirds of Canadians support expanding CPP, with a majority of those respondents saying they would support a doubling of benefits and premiums, said Frank Graves, president of EKOS Research Associates.

Driving that feeling among Canadians is a high sense of insecurity around the medium- and long-term economic outlook, Graves said.

“There is a pretty broad public mandate” to expand CPP, he said. “I don’t think it’s particularly dangerous for governments go down this path. In fact, there’s probably more political hazard to leave it alone than to do something.”

Then comes the question of when to make it all happen.

Saskatchewan has said the economy in parts of the country are too fragile right now for an increase in premiums, which critics call a payroll tax. B.C., another worker-rich province that also holds a fair bit of sway in the talks, says a modest expansion of the pension plan should happen “when economic conditions permit.”

Ontario, however, wants a deal now.

The federal Conservatives have questioned the rush to complete a deal by the end of the year, saying the Liberal government hasn’t proven its case for an across-the-board expansion of the program.

Behind the scenes, proponents and opponents of an expanded CPP expect some kind of deal to be reached on Monday, but remain unsure about the final details.