Enhancing the CPP and QPP: the Debate Rages On!

By Jacques Lafrance, FCIA
CIA President

As we begin a new year, I’d like to talk to you about a subject that is garnering a great deal of interest in the political arena, in the media, and among virtually all the members of our profession, regardless of their field of practice: should we enhance the Canada Pension Plan (CPP) and its Québec counterpart, the Québec Pension Plan (QPP)?

Has the CIA staked out a position on this question and, if so, what is it? In the fall of 2009, the Institute appointed a task force to look at certain characteristics of government-facilitated plans to allow the Institute to contribute to discussions on expanding and modifying the CPP/QPP. Made up of renowned, seasoned actuaries, this task force published its report in March 2010. The report does not come out for or against expanding the CPP/QPP. In fact, I recall that one of the task force’s members told me that the group had quickly agreed not to adopt a common position on this question, given the members’ highly divergent viewpoints. That said, the report expresses preferences as to the manner in which a CPP/QPP expansion should be undertaken, in the event that this occurs. Although this report is almost four years old, its commentary on enhancements to the CPP/QPP remains relevant.

There is no shortage of organizations and individuals who have weighed in on the question. In general, the opinions expressed are categorical. The arguments for and against enhancing the CPP/QPP can be summed up as follows:

For

Against

As a background to all of this are some very contrasting visions concerning the state’s role in our society.

There seems to be a broad consensus, however, about how to fund any potential enhancement of CPP/QPP benefits. Indeed, most stakeholders seem to agree on the need to fully fund such an enhancement. More specifically, additional contributions should be sufficient to finance the benefits resulting from the plan’s expansion, so as to minimize any cross-generational transfer.

In addition to supporting this principle of full funding, the Institute believes that it is preferable to carry out any CPP/QPP expansion uniformly across the country. For example, the possibility that Ontario could set up a separate program is not the ideal solution, to be sure. The Institute made similar comments in its submission to the Government of Québec concerning the D’Amours Committee’s recommendation to put in place the "longevity pension".

Some argue that setting up pooled registered pension plans (PRPP)—in Québec, voluntary retirement savings plans (VRSP)—will solve the problem of insufficient retirement savings. In its submissions, the Institute came out in favour of the legislative changes permitting these new instruments, because they will constitute an additional, effective tool for accumulating retirement capital. But the Institute also indicated that other changes are necessary, such as a more conducive environment to maintaining and adopting defined and target benefit pension plans.

The debate is far from over, and the Institute is in it for the long haul. I invite you to join the debate, regardless of your field of practice. The coming months may be a turning point in the future of retirement savings in Canada.

Jacques Lafrance, FCIA, is President of the Canadian Institute of Actuaries.

Canadian Institute of Actuaries/Institut canadien des actuaires
http://www.cia-ica.ca/