Voluntary top-ups to the Canadian Pension Plan (CPP) from individuals could help to ensure sustainable savings and pensions for retired Canadians in future, suggests a final report from the National Summit on Pension Reform held in New Brunswick.
Held in February 2013, the summit was hosted by the Public Policy Forum, the Government of New Brunswick, Morneau Shepell and Sun Life Financial to foster discussion and address issues around pension sustainability and retirement income security.
One of the possible solutions brought forward by participants was a voluntary top-up option for the CPP. According to the report, participants in favour of the solution argued that such a strategy would build on the secure benefits of the CPP and make it harder, and therefore less tempting, for participants to make early withdrawals, as happens with registered retirement savings plans. As well, a top-up option would not make contributions more onerous for employers, which is one of the perceived drawbacks of expanding the pension plan.
The report notes that the drawbacks of a top-up strategy include the institutional adaptation costs for the creation of private-style accounts. As well, this type of solution will only help people who are already covered by the CPP.
In addition to describing possible alternative strategies, the report outlines the following seven policy direction considerations for the creation of sustainable pensions:
- Take a close look at the tax code for changes that would encourage Canadians to save more
- Pension reforms must be adaptable and flexible in order to be successful
- Transparency in the reform process
- Collaboration across all sectors and stakeholders
- CPP reform
- Simplify and inform investors of recently created vehicles such as the tax-free savings account
- Consider the shared risk pension plan adopted by New Brunswick