Canada’s Pension Tension

Canada’s union leaders may say that pension reform is simply a matter of changing the (Canada/Quebec Pension Plan) CPP/QPP formula in order to give Canadians double the benefits, but this will cost small business owners and their employees in the form of a massive increase in premiums. Yes. Another payroll tax hike, which kills jobs and reduces the take-home pay of every worker. Don’t be fooled to think that you’ll get double the benefits for nothing.

The real crisis lies in unsustainable public sector pension commitments and the lack of fairness in the Canadian pension system overall. There is already too large of a gap between private sector and public sector retirement benefits – a gap that will not go away and will only grow larger unless governments address pension inequality. You should not be asked for one more cent in payroll tax until federal and provincial governments fix Canada’s pension unfairness.

A mandatory increase in CPP/QPP premiums means:

  • Higher payroll taxes that will kill jobs and reduce wages
  • Having the employee and employer each paying an additional $1,300 per year
  • For most Canadians working today, a negligible difference in realized CPP/QPP benefits as even the unions admit it will be 40 YEARS before CPP/QPP benefits are doubled
  • Inevitable tax hikes to cover the cost of public sector pensions as changing demographics leads to fewer workers supporting more retirees
  • No relief from the estimated $200+ billion unfunded liability currently looming within the federal public sector pension structure

Where’s The Fairness in this?

There is a solution; Canada's retirement income system can be fixed without mandatory CPP/QPP increases:

  • Better voluntary pension plans for small business such as Pooled Registered Pension Plan (PRPP)
  • Eliminating the gap between the private and public sector pensions by putting new civil servants on a less costly defined-contribution plan
  • Ensuring the number of working years is the same as the private sector
    (NOTE: CFIB is not suggesting governments remove pension benefits from current retirees or those who have earned them)

If you are opposed to a mandatory increase to CPP/QPP premiums:
  • "[The budget] was a missed opportunity to address the massive unfunded pension liability and deal with the ever rising cost of Canada's civil service. This is really about fairness to taxpayers that will ultimately get stuck with the bill if not addressed soon," concluded Swift.

  • "It is time to deal with the cost of Canada's civil service and move this issue front and centre where it belongs," recommends Swift. Adding, "We also hope this budget moves away from earlier plans to increase the Canada/Quebec Pension Plan (C/QPP). What we need is fairness, not another increase in taxes."

  • "We are not calling for changes to past benefits that have already been earned," clarified Swift. "However, we are calling on governments to reform public sector plans along the lines of what is happening in many private sector plans - reducing benefits and converting defined benefit plans to defined contribution plans. These are necessary steps in striking a better balance between taxpayers and public sector employees."

  • "I can see the merit of both sides of this argument. I fully agree that the public sector employee has benefits that far exceed the private sector counterpart. I agree that measures should be taken to rein in the government 'give-aways' when negotiating contracts with public sector unions, both for the rank and file worker but equally importantly for the excessive golden handshakes given to management. [cont.]"

  • "[contd.] That said, private sector workers are not putting enough away to fund their retirement, an increase in CPP may be the only way to ensure a retirement above the poverty line for many Canadians. Obviously the CPP will face greater pressure as the baby boomers retire, and fewer workers will have to fund the CPP program. I would suggest the government amend the CPP act to have the employee pay a greater percentage of the CPP premium. (i.e. 65% employee 35% employer). This would reduce the burden on the employer and also have the person who ultimately benefits from the program pay a greater portion for their retirement funds."

  • "As a self-employed individual I already pay the maximum CPP each year - both the employee's and employer's portion for a total of over $4300 each year. My wife is also self-employed and pays the same. Over $8000 per year between the two of us for just CPP is already overtaxation! Any further increase to CPP rates will not be good for individuals of the economy in general. Payroll taxes are too high now, and increasing them will be counterproductive to encouraging the hiring of new employees."

  • "I am opposed to CPP premium increases. Businesses should not have to pay another "tax" like this to bail out poor pension management by the government."

  • "Many of us small businesses are just barely staying above water with the recent recession and unfair competition of big box stores etc. I have reduced my staff to minimal as it is and any further expenses to the wages means I may as well close. This puts another couple of full-time people out of work and closes the doors of another small business. [cont.]"

  • "[contd.] These public sector unions and employees do not live in the real world and neither does the government with increasing minimum wage and benefits. The economy would do much better if increases in wages were due to merit. Public sector needs to revisit merit raises and benefits. No buyouts and reasonable pensions with paying at least half or more of the portion out of their wages. I don't have a pension, I can't afford to put anything away."

  • "I feel that individuals have to take more responsibility for saving for their future rather than relying solely on government benefits. To my knowledge being in the financial industry the Canada pension plan is well funded for many decades and at present there is no need to increase anyone’s premiums. As a small business owner we pay double the premiums already."

  • "Yes I oppose - since my CPP will be clawed back when I retire (as a public servant) so why pay more in to CPP?"

  • "I am opposed to increases in CPP premiums. I employ 50 people in my business. An increase in payroll tax will hurt our growth and cause hardship for my employees. I agree that the public sector pensions need to be fixed first. Look at the problem in Greece. Canada will have a similar problem in 10 years if we continue to fund unsustainable pensions. The next battle will be the unfunded WSIB. Payroll taxes go on and on. Mostly driven by public sector salary and pension costs?"
    Ontario CFIB member
  • "Our business has suffered much during this recession (loss of almost 30%) We, as the owners now earn less than minimum wage - how can we possibly pay more for our employees wage costs? We will be forced to lay off and are already considering closing our doors...after all minimum wage at another "job" would leave all burdens to some other business owner and give us a "life" back with our family. We are constantly asking ourselves who would invest their life savings to run a business that pays less than one could earn at Walmart!? [cont.]"

  • "[contd.] It is also shameful that in a small town a lot of the "new" government employees I see are not locals who need and deserve the jobs, but "transplants" who have succulent wages, benefits and pension packages - often they are very young. How is it that these people are "preferred" above those who have supported a region many years?"

Are you opposed to a mandatory increase to CPP premiums? Why?
 

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