PRPP: Tories Cut Off Debate On Registered Pooled Pension Plan Amid Outcry Over Unrelated OAS Reforms
OTTAWA - The Conservative government's move Tuesday to curtail debate on legislation creating a new pooled pension plan illustrated some of the potentially scalding political perils of retirement reform.
There is nothing very controversial about the Harper government's December 2010 promise to add a relatively low-cost, private pension option that can be used by employers and workers to set up retirement savings plans.
While opposition parties have dismissed "Pooled Registered Pension Plans" as missing the mark or redundant, the critiques have been relatively mild. The proposal offers an additional way for Canadians to save for retirement, which few can condemn.
"This is really just another group RRSP," NDP critic Irene Mathyssen complained Tuesday in the House of Commons. "It has none of the benefits of the Canada Pension Plan."
But as parliamentarians returned from a six-week break, debate on the legislation has provided opposition MPs a venue to tee off on a far more contentious notion — tinkering with Old Age Security.
Prime Minister Stephen Harper let the pension genie out of the bottle last week with a speech in Davos, Switzerland, where he made the case that OAS, in its present form, is unsustainable in the longer term.
His government has been playing defence ever since, stoutly insisting that current "seniors will not lose a penny" — but leaving future pension provisions in a cloud of ambiguity.
The lack of clarity has allowed the pension issue to dominate the first two question periods of the winter sitting of parliament, with the prospect of many more to come.
"Seniors are worried about their future, but they are also worried about the future of their children and their grandchildren," interim NDP Leader Nicole Turmel lamented Tuesday. "Our seniors have worked hard to give a better life for future generations."
Harper was left to reiterate that no immediate benefit changes are coming, while enigmatically affirming that "younger generations expect us to ensure the system is viable for them."
Into this morass, the government brought forward for debate Bill C-25, the innocuous pooled pension bill. But the manoeuvre simply allowed the opposition to keep the kettle boiling and maintain the whole pension issue in the public eye.
Liberal Leader Bob Rae, ostensibly addressing pooled pensions, barely touched the legislation itself in his address to the Commons earlier this week.
"The Conservative Party was opposed to the original Canada Pension Plan," he charged, digging back 85 years for fodder.
"The leader of the Conservative Party, in his then job as the president of the National Citizens Coalition, was opposed to the improvements in the Canada Pension Plan (in the 1990s) that led to its sustainability — for which he took credit at Davos in his speech last week."
By Tuesday morning, the Conservatives had heard enough. The majority voted to limit debate on second reading of Bill C-25 to two more days.
"That they're willing to delay and obstruct that and not allow it to go forward to a vote is really surprising to me," said Peter Van Loan, the government House leader.
But after only a single day of parliamentary debate, there had been no evidence of obstruction, only opposition MPs doing what they're paid to do.
The Harper government has limited debate on legislation 13 times since it won its majority last May according to the NDP.
While debate was curtailed on a number of previous Conservative bills because they were highly contentious or time sensitive, the pooled registered pension is not.
"Probably they are worried about the seniors' reaction to this," Turmel said when asked about why "time allocation" was invoked so quickly.
"Already, we have seen reaction from their own voters on this issue about pension."
Harper having raised pension reforms himself out of the blue last week, the issue appears to be a topic his Conservative government no longer wants to discuss.
Big Canada Pension Plan Changes Coming In 2012
Ottawa is bringing in a raft of new or tweaked policies to reflect that retirement these days is more of a gradual transition for many people rather than a single event. Many of these changes either begin in 2012 or are entering the next phase-in period, and they'll have a direct impact on the retirement plans of Canadians. In some cases, the changes are big enough that people nearing retirement may want to have a chat with a financial adviser before deciding exactly when to apply for a CPP retirement pension. (Justin Sullivan/Getty Images) <em>With files from CBC</em>
1. Early CPP, Lower Benefits
The first change involves payment rates. People can choose to take a CPP retirement pension as early as age 60. But there's a catch: A 0.5 per cent reduction in the pension payout for each month before age 65 that someone begins receiving it. That translates into a retirement benefit that's 30 per cent less at age 60 that it would be if you waited until 65. Starting in 2012, Ottawa is beginning to phase in a bigger reduction to get that early access. For 2012, the penalty rises to 0.52 per cent per month -- or a 31.2 per cent reduction for someone who starts receiving their retirement pension at age 60. The early-bird reduction will continue to rise until 2016, when it hits 0.6 per cent per month, or a maximum 36 per cent reduction for those who start receiving CPP payments at age 60 rather than waiting until they reach 65. (Getty)
2. Later CPP, Bigger Benefits
Similarly, those who wait until after the age of 65 to start collection CPP will get a bigger increase in their retirement benefit. Before 2011, the rules stated that the CPP retirement benefit was boosted by 0.5 per cent for each month after age 65 that an individual put off receiving it. So someone who waited until age 70 would enjoy a 30 per cent boost in their payments. But starting in 2011, the government began to phase in a gradual increase to that delay bonus. For 2012, the increase for each month after 65 that a person delays applying for CPP goes to 0.64 per cent -- or a maximum increase of 38.4 per cent for those who start receiving a pension at age 70. By 2013, the maximum bonus moves to 42 per cent. These changes won't affect people who are already receiving CPP benefits. They are being made, according to Service Canada, to restore these adjustments to "actuarially fair levels," so there are "no unfair advantages or disadvantages to early or late take-up of CPP retirement benefits." (Getty)
3. Drop-Out Years Increase
Canadians currently don't need to contribute to the CPP every year from age 18 to age 65 to get a full CPP retirement pension. When someone's average earnings over their contributory period are calculated, 15 per cent of their lowest earning years are automatically ignored when the calculation is made. For someone who takes their CPP retirement pension at age 65, that means seven years of low or zero earnings are dropped from the equation. But starting in 2012, that "general drop-out provision," as it's called, goes up to 16 per cent. For someone eligible for CPP benefits in 2012, that will allow up to 7.5 years of the lowest earnings to be excluded from the calculations -- boosting the retirement benefit paid. In 2014, the percentage will rise again to 17 per cent, which will allow up to eight years of low earnings to be dropped. These changes can really benefit people who entered the workforce late, who were unemployed for a long time, or took time off to go back to school. One point to note is that there are separate drop-out provisions specifically for time spent out of the workforce because of disability or to have children. (Alamy)
4. 'Work Cessation Test' Dropped
CPP rules used to require that someone stop or drastically reduce the amount they earned during the two consecutive months before they began to receive a CPP retirement pension. This was, for many Canadians, an annoying and costly requirement -- especially since so many people now ease into retirement instead of stopping work completely. Now, that rule is history. Beginning in 2012, the "work cessation test" has been eliminated. (<a href="http://www.flickr.com/photos/misteraitch/" target="_hplink">Flickr: misteraitch</a>)
5. Post-Retirement Benefits
There's another rule change that's important for semi-retirees to be aware of. Before 2012, if someone started receiving a CPP retirement pension early -- say, at age 62 -- they didn't have to make any CPP contributions if they decided to collect payments but also keep working after age 62. Starting this year, if you are under age 65 and continue to work while also drawing a retirement pension, you and your employer must make CPP contributions. The good news for employees is that these extra contributions will be credited to what's called a Post-Retirement Benefit (PRB), which will result in a higher CPP retirement pension in the year after you make contributions to your PRB. This measure is a nod to the reality that many "retired" Canadians are still working. Canadians who continue working after age 65 and are receiving a retirement benefit will have the choice of whether or not they want to make CPP contributions. If they choose to make them, their employer must kick in their share too. Those additional contributions will go towards higher benefits beginning the year after the PRB contributions. (<a href="http://www.flickr.com/photos/elwillo/" target="_hplink">Flickr: Keith Williamson</a>)
6. Premiums And Benefits Rise
CPP benefits are always adjusted to reflect the rising cost of living. For 2012, the increase in benefits is 2.8 per cent. That will bring the maximum monthly CPP retirement pension to $986.67. Contribution rates are unchanged. But since the yearly earnings maximum that the rate applies to is going up, the maximum annual contribution will rise by about $89 in 2012 to $2,306.70 for both employees and employers. (<a href="http://www.flickr.com/photos/redvers/" target="_hplink">Flickr:R/DV/RS</a>)