When the Liberals were given a mandate to govern via a majority election victory in the fall, one of their key election promises was to look at expanding the Canada Pension Plan (CPP). The Liberals promised to “work with the provinces and territories, workers, employers, and retiree organizations to enhance the CPP.”
This isn’t the first time CPP expansion has been mentioned – it was discussed three years ago at Meech Lake, again in 2013 and early last year prior to the election. Although there doesn’t seem to be a general consensus on how to address the looming retirement crisis, one thing is certain: something has to be done.
With the Canadian economy still dealing with the aftermath of plunging oil prices, Federal Finance Minister Bill Morneau has agreed to put any plans of immediate CPP expansion on hold. Morneau made the announcement on Monday, December 21, 2015, shortly after meeting with provincial and territorial finance ministers. For the meantime, the provincial ministers and Morneau have decided to hold off on expanding CPP and will be kicking off consultation and other “milestones” in the new year to determine how to proceed.
A Struggling Canadian Economy
With talk of another interest rate cut by the Bank of Canada in the New Year, this shouldn’t come as a surprise. Manufacturing was supposed to pick up, helped by the low loonie. Instead there was a notable drop in manufacturing in the October 2015 GDP numbers. Bank of Canada Governor Stephen Poloz has even gone as far as discussing the possibility of negative interest rates.
Also read: How do Negative Interest Rates Work?>
The Canadian economy usually moves in lockstep with the U.S. economy. While the Federal Reserve is raising interest rates, Canada finds itself in the unique situation of not following suit. It’s hard to argue with the government’s decision of getting the economy back on track before considering CPP expansion.
The Future of CPP Expansion
CPP expansion may be off the table for now, but that doesn’t mean it won’t happen eventually. The federal government is considering a range of options from the status quo to significant changes. It’s starting consultation on a range of options. The finance ministers plan to meet up again in June 2016 to discuss “substantive options,” before meeting up again in December 2016 to try to come to some sort of agreement.
Ontario Moving Ahead with the ORPP
Canada’s most populous province is moving ahead with plans to introduce its own pension plan. The Ontario Retirement Pension Plan (ORPP) looks to fill the gap of workers not saving enough for retirement. However, CPP expansion is still the preferred solution for Ontario, and Ontario Finance Minister Charles Sousa will still push forward with talks.
In order for CPP expansion to move forward, the federal Liberals need to have at least seven provinces with two-thirds of the Canadian population on board. With each province with its own concerns and agenda, it’s no easy task. It remains to be seen when and if CPP expansion moves forward, but at least the Liberals seem receptive to the idea and haven’t outright dismissed it like the Conservatives.