Back in my July 6 column, I discussed the many proposed changes by the Liberal government to increase Canada’s CPP system.
That report can be found at: http://www.danalbas.com/mp-report/changes-in-cpp
This past week, debate on expanded CPP, known as Bill C-26, is currently before the House of Commons where I voiced my opposition. As I believe in being accountable to citizens, I would like to share some of the reasons why I believe now is not the ideal time to expand CPP.
One of the concerns I have heard loudly from small business owners on this subject was the obvious fact that expanded CPP will increase the costs of not only hiring new workers, but also increases payroll costs for existing workers.
It is for this reason that expanded CPP is often referred to as a payroll tax.
While no small business owners shared with me they would eliminate existing staff due to increased costs many said future wage increases might instead be directed into covering the CPP increases or that plans of hiring additional workers may be put on hold.
Given that Canada’s job numbers are weak right now and economic growth forecasts are being downgraded in my view now is not the ideal time to increase employment costs to small business owners.
Another reason why I oppose expanded CPP is due to the fact that in my view it is not an ideal retirement asset.
For those citizens who do not live to reach 65 or only live a few years beyond 65, a lifetime of contributions paid to CPP are of no significant benefit to a spouse of family in that the full value of the contributions cannot be transferred through an estate.
Conversely a TFSA is fully transferable to your family though an estate and does not adversely impact small business job creators. Ironically the Liberal government reduced TFSA contribution levels arguing they were worried Canadians would be saving too much before turning around to announce plans to increase CPP over concerns citizens were not saving enough thus Government would do it for them.
One of the lesser known criticisms of CPP and one I raised in Ottawa this week was the fact that increasingly your CPP contributions are being consumed by significantly rising administration costs.
As well-known national media columnist Andrew Coyne has also pointed out, staffing has increased at the CPP Investment board from five in 1999 to around 1,200 today. Likewise, operating costs went from $3 million in the year 2000 to $803 million in 2015, not to mention that external management fees have risen from $36 million in 2006 to $1.25 billion in 2015.
These are significant administration increases and more so when one considers that the Office of the Superintendent of Financial Institutions in the August 2014 report assessing the sustainability of the CPP through actuarial balance sheets reported that although sustainable currently the CPP has an unfunded liability of $9 billion using open group methodology.
Given that increased CPP adversely impacts small business job creators at a time when the economy is sluggish this is a serious concern.
On top of that concern is the limited financial transportability of CPP. When you consider that you and your employers lifetime contributions to your CPP is very limited in being able to be transferred to your spouse or family in an estate I believe that the Liberal government should have spent more time exploring other options.
When one also considers the significantly growing administration costs combined with the fact that there is currently an unfunded liability of the existing CPP plan I spoke against expanding this program at the present time.
As always I welcome your comments, questions and concerns on this or any topic. I can be reached at Dan.Albas@parl.gc.ca or toll free at 1-800-665-871
