Ottawa, ON (Dec. 17, 2012) – Today federal and provincial finance ministers will be meeting at Meech Lake to debate a potential reform of the Canada/Québec Pension Plan (C/QPP), coming to grips with the fact that Canadians are not saving enough for retirement and recognizing that the pooled registered pension plan (PRPP) initiative may need to be supplemented.
Simon Curtis, President of the Canadian Institute of Actuaries, said today, “Canada’s actuaries are acknowledged experts in pension and retirement savings matters and we support these discussions—pension reform on government agendas is good for Canadians. We encourage such conversations and look forward to hearing the results.”
In terms of increasing C/QPP benefits, there are solid advantages:
- The CPP is a defined benefit plan, and the Canadian Institute of Actuaries believes these are efficient plans for delivering retirement income to Canadians;
- The C/QPP system’s infrastructure already exists;
- Payroll deduction and individual adjustments can be made through tax returns;
- The investment capabilities of the CPP Investment Board (and the Caisse de dép�t et placement du Québec) are well known; and
- Economies of scale will benefit plan members.
“However, increasing C/QPP benefits is not without its issues,” Mr. Curtis added. “New benefits should be fully funded to avoid intergenerational inequities and to maintain the sound funding of the C/QPP. It will take 40 years before the full impact of any new benefits is felt. Increasing C/QPP benefits, even modestly, is not a short-term solution. This element needs to be communicated clearly, along with the need to save more.
“Details on any contemplated reform will not be known until later today. No doubt the discussions will be arduous. A C/QPP enhancement, if any, must be carefully designed so that it does not unintentionally lead to a reduction of Guaranteed Income Supplement payments that many Canadians rely on. Moreover, as the C/QPP is based on a ‘one size fits all’ principle, any expansion should still leave significant room for private pension plans to accommodate the particular needs of various employee groups.
“There are many other options that can be explored. We hope governments will not stop at this reform, but will do more to improve the legislative and regulatory environment for employer-sponsored defined benefit pension plans across the country.”
About the Canadian Institute of Actuaries
The Canadian Institute of Actuaries is the national organization of the actuarial profession. The Institute is dedicated to serving the public through the provision, by the profession, of actuarial services and advice of the highest quality. In fact, the Institute holds the duty of the profession to the public above the needs of the profession and its members. Actuaries employ their specialized knowledge of the mathematics of finance, statistics, and risk theory on problems faced by pension plans, government regulators, insurance companies (both life and property/casualty), financial institutions, social programs, and individuals.