Although a new national public pension plan with coverage for all workers without an employer pension would be the most targeted policy response, enhancing and expanding the private pension system could prove very beneficial, says TD Economics.

In a submission to the Ontario government published Tuesday, TD says that the most at-risk population for a shortage of retirement savings is low-middle income individuals that do not have an employer pension. It prefers a solution that would target that population.

In an earlier report, TD argued that the optimal response would be the creation of a supplementary public pension plan with default enrolment (voluntary opt-out) for all workers without employer pension plans. “We felt that this would provide increased coverage for the most vulnerable population and would have a scale that could provide the service at a relatively low cost,” TD says.

TD Economics would also support a broadening of pension services from the private sector. “By eliminating the employee-employer relationship requirement, an expanded range of competitive private sector options could be made available,” it says, noting that it supports this idea and “any others that would enhance the availability and efficiency of private sector pension vehicles”.

The firm indicates that it is less in favour of expanding the CPP, which carries the disadvantage of being a payroll tax That said, it allows that one CPP enhancement option that has some merit is raising the earnings ceiling to $70,800.

“It does not appear necessary to raise the CPP ceiling more aggressively than 1.5 times the current level, since a greater increase would really be aimed at high-income individuals that have good opportunities to save,” TD says.

“If modest CPP enhancement is pursued, raising the earnings ceiling might be the most effective at helping the most at-risk group — that being low-middle income individuals,” it concludes.

IE