Federal and provincial finance ministers have realized Canadians aren’t saving enough for retirementTDAM, says the Canadian Institute of Actuaries.
They’ve also recognized PRPPs need to be supplemented, and plan to discuss next steps at an upcoming meeting where they’ll debate a potential reform of the Canadian/Québec Pension Plan.
Read: CPP and life expectancy
In terms of increasing benefits, the institute says there are several solid advantages to maintaining these plans. These include:
- The CPP and QPP are defined benefit plans, and are efficient ways to deliver retirement income to Canadians;
- They’re infrastructure already exists;
- Payroll deduction and individual adjustments can be made through tax returns;
- The investment capabilities of the CPP Investment Board and the Caisse de dépôt et placement du Québec are transparent; and
- Economies of scale will benefit plan members.
“New benefits should be fully funded to avoid intergenerational inequities and to maintain the sound funding of the CPP and QPP,” says Simon Curtis, president of the Canadian Institute of Actuaries.
He adds, “It’ll take 40 years before the full impact of any new benefits is felt, however. Increasing CPP and QPP benefits, even modestly, is not a short-term solution.”
Although the discussions will be arduous, he also says the plans must be carefully designed so they don’t unintentionally lead to a reduction of the GIC payments that many Canadians rely on.
Another potential problem is any expansion should still leave significant room for private pension plans to accommodate the particular needs of various employee groups.
“We hope governments won’t stop at this reform, but will do more to improve the legislative and regulatory environment for employer-sponsored defined benefit pension plans across the country,” says Curtis.
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