Newspaper article The Canadian Press

Five Things to Know about the Canada Pension Plan and Talks to Expand It

Newspaper article The Canadian Press

Five Things to Know about the Canada Pension Plan and Talks to Expand It

Article excerpt

What you need to know about CPP talks


OTTAWA - Finance Minister Bill Morneau meets his provincial and territorial counterparts in Vancouver on Monday and one of the key agenda items is going to be the federal Liberals' wish to expand the Canada Pension Plan. Here are five things to know about the CPP and the politics around it.

1) The system is designed so that each generation of workers pays for its own retirement. That makes it different from two other income replacement programs for seniors and retirees: old age security (OAS) and the guaranteed income supplement (GIS). Those measures are covered through general tax revenues, meaning that workers today pay taxes to raise the incomes of poorer seniors. Any decisions on the future of the CPP would have a greater effect on younger workers than older workers. Will they pay attention?

2) CPP contribution rates have only been raised once in the last 20 years. In 1997, finance ministers agreed to a phased-in increase in contribution rates to ensure one generation of workers wasn't paying for another generation's retirement. The argument today is that the CPP should pay more in benefits and help those who aren't saving enough for retirement. The argument against raising contribution rates is that it would hit workers' wallets at a time when governments keep saying the economy is fragile.

3) Expanding the CPP has come down to one of two scenarios. One would be an across-the-board change that would mean higher benefits and contribution rates for all workers; the other would target those segments of the population who aren't saving enough for retirement. Those who aren't saving enough are the same people the federal Liberals want to help financially: Middle income earners. Research suggest those earning between $55,000 and $75,000 -- some studies put the upper limit above $100,000 -- are not saving enough for retirement, or don't have an adequate workplace pension. …

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