Everyone agrees that many Canadians aren’t saving enough for retirement. But don’t expect one big solution. Expect several. Having failed to marshal a consensus at the finance ministers’ meeting in December, the provinces that pushed for an expanded Canada Pension Plan (so-called “Big CPP”) are now making good on their threat to create their own universal pensions. And where Ontario and Quebec go, others are likely to follow.
Premier Kathleen Wynne announced Ontario would unveil a provincial pension scheme this spring and invited other provinces to join in. Prince Edward Island Finance Minister Wes Sheridan said his province was interested.
The plan won’t necessarily be a “Big OPP” modelled on the national program. Wynne mused that while employees would be automatically enrolled in the plan, those who prefer to save on their own might have the opportunity to opt out.
Many pension experts support such a “middle way” approach that’s not purely voluntary but far more flexible than CPP. “I would advise them strongly not to do an Ontario version of CPP,” says Keith Ambachtsheer, director of the International Centre for Pension Management at the University of Toronto. “It would be hugely complex and likely to fail. And I think they know that.”
Meanwhile, Quebec has already passed legislation for a pension based on “middle way” principles, which it calls voluntary retirement savings plans. The province will ultimately require all employers with five or more employees to auto-enrol their workers and deduct contributions at a default rate of 4% of earnings. Employees will be free to opt out or change the contribution level. Employers will not be required to contribute. The Quebec plan will be ready for voluntary sign-ups on July 1, followed by auto-enrolment for larger companies by the end of 2016. Smaller companies will get more time to sign on.
These initiatives come on top of Ottawa’s rollout of pooled registered pension plans (PRPPs), which have been enabled federally and by the western provinces but not yet implemented. Like Quebec’s plans, PRPPs are to be offered by private insurance companies, not a single, government-mandated manager (as with CPP). They are also purely voluntary, which Ambachtsheer says makes their lack of uptake to date “completely predictable.”
The opt-out provisions should help ensure the plethora of plans do not present pension overkill. But for employees who move and employers that operate in multiple provinces, saving for retirement looks bound to become more complicated.