MEECH LAKE, Quebec (Reuters) - Canada’s finance minister agreed on Monday to set economic benchmarks for potentially expanding the country’s public pension system in the future, but said the economy was too weak now to demand bigger contributions from businesses and workers.
Federal Finance Minister Jim Flaherty met with his provincial counterparts late Sunday and Monday to discuss issues of joint responsibility.
The main item on the agenda was a proposal for “modest” enhancements to the Canada Pension Plan (CPP), based on studies showing Canadians are not saving enough for their retirement and raising doubts about the government’s ability to finance the pensions of retiring baby boomers.
Flaherty had previously ruled out any changes to CPP but appeared somewhat more flexible at the end of the meeting, although punting any policy action until a later date.
“There’s no consensus on the CPP expansion at this time but the ministers did agree that we would task our officials with working on definitions of ‘modest increase’ and economic triggers that we would then discuss at our next meeting in June,” Flaherty told reporters.
The CPP is a nationwide program, although the province of Quebec also has its own similar program, to which all employers and employees must pay premiums.
Flaherty said provincial finance ministers were hesitant to move ahead with changes because of the uncertain economic outlook.
“We’ll need to have some kind of measure about real GDP growth, or an unemployment rate, or both, triggers like that so that the ministers can be confident, and the government can be confident, that the economy could take the extra burden that would be put on employers and employees were there to be an increase in the contribution rate to the Canada Pension Plan,” he said.
Various formulas for boosting the savings rate under CPP have been floated. Any changes would require agreement by two-thirds of Canada’s provinces representing two-thirds of the population, but Flaherty has said he would prefer unanimity before making such a major shift.
Ontario Finance Minister Dwight Duncan, one of the most vocal proponents of pension reform, said he was pleasantly surprised at the progress made.
“I was worried we wouldn’t move forward today, we’ve moved forward, it’s still a little too slow for my taste but I think this allows us to move to the next step,” he said.
The Canadian Labour Congress said on Monday 60 percent of workers in Canada have no workplace pension and one-third between the ages of 24 and 60 have no retirement savings.
Reporting by David Ljunggren; Writing by Louise Egan; Editing by Tim Dobbyn