Canada may link pension reform to economic thresholds

Mon Dec 17, 2012 5:40pm EST
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By David Ljunggren

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.   Continued...