The pension conundrum: Who should pay to boost the CPP?

Recent calls to boost the Canada and Quebec Pension Plans will further burden business owners and will push wages down as much as 2.5%, according to a new report.

The Canadian Federation of Independent Business said it has studied recent proposals made by the Canadian Labour Congress and others to up CPP and QPP benefits and premiums.

The CLC proposal, it found, will force pay down as much as 2.5% in the long term.

With Canadians more indebted than ever, retirement funding has become a hot-button issue with many claiming the CPP and QPP aren’t enough to sustain quality of life, especially for those currently working in the private sector. The average retired Canadian man gets $6,800 a year from the CPP, while the average woman gets just $4,700.

Canada’s finance ministers have received a flurry of proposals on how to revamp the system ahead of their meeting on retirement income in December.

“One way or another everybody has to save more or we’ll be facing a crisis,” said Jeff Atkinson, a spokesperson for the CLC.

The CLC has proposed gradually doubling the benefits plan with premium increases of 0.47% in each of the next seven years, which works out to an additional $3.57 per week for a worker earning $47,200.

But employers, who already have the burden of funding employment insurance, would have to match the new premiums and that will drive wages and even job growth down, the CFIB said.

And the spending power that comes along with increased savings won’t be fully realized for 40 years, it said.

"The other important lesson of this exercise is to shed light on the fact that the bulk of the negative economic impacts would be the result of increases to employer-paid premium costs," said CFIB chief economist Ted Mallet.

Catherine Swift, president of the CFIB, said the real problem is the gap between private and public sector pensions.

"Taxpayers struggle to save for their own retirement, in part because they are paying dearly for the pensions of civil servants,” she said.

The CFIB says that if premiums must be raised, then they should be raised on the employee side only.

"As employers pay 60% of Employment Insurance premiums compared to 40% for employees, perhaps employees should pick up more of the cost of CPP, leaving employers' premiums at the current level,” she said.

CLC President Ken Georgetti said unionized employers and the public sector have done their part to ensure better retirement income and now it’s time for the private sector to step up to the plate.

“If you follow Swift’s argument to its illogical conclusion, she would argue that everybody should be as poor as the poorest private sector worker. That’s not the goal,” he said.

Employers who already offer a pension through an Registered Retirement Savings Plan could transfer some payments to the CPP since it is tax deductible and offers a better return for workers, he added.