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How the Tories, Liberals and NDP differ on pension proposals

By James Langton |

Making reforms to the retirement income system is one of the core issues in the current election campaign.

All three major parties agree that changes are needed to the current system. The primary difference between them is philosophical — whether the private sector can be relied upon to deliver a better option, or if a public solution is required. Not surprisingly, the Tory government of Stephen Harper favours private sector delivery, whereas the Liberals and NDP believe that the Canada Pension Plan should be expanded to provide greater retirement security.

The one measure that all three parties are promising is a boost to the Guaranteed Income Supplement, which goes to the poorest retirees. The only thing they differ on is how big the boost should be.

The Conservatives, which are largely running on the strength of the budget they handed down shortly before the government was defeated, promised to bolster the GIS by $600 per year for individuals and $840 for couples in that budget. While this was seen as a plum for the NDP to entice it to support the budget, it nonetheless survives in the Conservative election platform.

The Liberals and NDP also both promise to boost the GIS, although they suggest bolstering the benefit by $700 million per year, compared with the $300 million promised under the Tory plan.

The Tory platform doesn’t contemplate any other changes for the primary pillars of the public retirement system, Old Age Security and the CPP. However, the Tories are promising to implement the Pooled Retirement Pension Plan vehicle that it proposed to introduce late last year. The PRPP, which was announced in the wake of a review of the retirement income system, is intended to serve as a more cost-effective alternative to RRSPs, allowing both employees and the self-employed to pay into large defined contribution plans that would be administered by private firms.

By contrast, the Liberals are targeting their proposed changes to the retirement income scheme on the public side of the system. Their platform promises an enhanced CPP. It pledges to work with the provinces and territories to enhance the CPP in two ways: both by gradually increasing the defined benefits provided under the core CPP; and, with the creation of a new, voluntary supplement to the CPP called the Secure Retirement Option.

It imagines that the supplementary CPP would fall within the existing RRSP contribution limits, so it would not represent a big new savings opportunity for those that have maxed out their RRSPs. Rather, it would give workers a way to save in a plan with much lower administrative and management costs than an individual account. And, it would also provide a way for employers to provide low-cost pensions by contributing to employees’ SRO accounts.

The basic idea behind both the Tory plan for a PRPP and the Liberal promise for a supplement to the CPP is similar — to provide workers with a more cost-effective alternative to RRSPs. The key difference is whether this new savings option would be privately, or publicly, administered.

Additionally, the Liberals promise to do more to protect benefits for employees whose companies go bankrupt, by creating a “stranded pension agency,” which would allow workers to transfer their workplace pension into the CPP.

Echoing the Liberals, the NDP is also pledging to juice up the CPP. It has said that it would gradually double the CPP’s benefits, although it hasn’t provided any details of its plans. The Liberals don’t provide any details on their pledge to bolster the core CPP either. Finally, the Green Party (which is just hoping to get an MP elected, not to form the government) says that it would reduce CPP contributions as an offset for the introduction of a carbon tax.

Additionally, the Tories are pledging to bolster another private retirement savings vehicle, albeit not for some time. They are also promising to double the contribution limit for tax-free savings accounts from $5,000 to $10,000. However, this measure wouldn’t take effect until the deficit is eliminated, which the government currently expects to do by the 2015-2016 fiscal year.