IN THE HOUSE – Liberals trying to solve a CPP problem that doesn’t exist

House of Commons. (

House of Commons. (

Excerpts from what Kamloops-Thompson-Cariboo MP Cathy McLeod had to say in the House on Tuesday, Oct. 25, 2016 about Bill C-26.

MR. SPEAKER, I am pleased to stand to speak to Bill C-26, an act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act, and the Income Tax Act.

MP Cathy McLeod.

MP Cathy McLeod.

What does this really mean, in layman’s terms? It means that there would be a phased-in, mandatory, hike to the CPP premiums for both employer and employee. This hike would be as high as $2,200 per employee.

It is clear from this legislation that the government is not only trying to solve a problem that does not exist, in terms of our system, but does not trust Canadians to make decisions about how they best spend their own money. I think, actually, this bill should really be called the “Wynne bailout
bill” or “Liberal election tit for tat” because we know that the Ontario government got itself into a really difficult position with some commitments
in terms of what it was going to do with the retirement fund, and indeed, the federal Liberals had to come to its rescue.

I am going to give a few examples about the negative impact of this legislation but, first, I will talk about something that is important and that has been a bit lacking in the conversation we have had today. The tools they are going to use are our Canada pension plan and our Canada Pension Plan Investment Board.

Most Canadians are very aware of this pillar of our retirement program, but very few have much of an understanding of the underlying dynamics. Certainly when I was a young adult in the workforce, I knew there was something called CPP that was coming off my paycheque. However, the big rumour at the time when I was initially contributing was that this CPP was going to run out of money so I really had to worry about saving my own money anyway.

That clearly has not happened, but I think we are making assumptions about this plan, and I think we need to pay some attention to this plan and what it is all about.

I do want to draw members’ attention to an October 17 article by Andrew Coyne. He raised some really important issues that have, again, as I noted, not been raised in this debate. I am going to spend a minute or two talking about the issues he raised, by quote or paraphrase, because I think they are absolutely critical and they represent concerns I have had over the last couple of years.

The first is that “CPP is supposed to be cheaper than private plans on account of its larger scale”.

Most Canadians have no idea, but costs at the investment board have increased, times 22, over the past decade. They have gone from $118 million to more than $2.6 billion. That is an absolutely enormous increase that has happened over just a short time frame.

At roughly 1% of assets, and that is not counting the distribution costs, the CPP is now significantly more expensive than most private exchange funds. I think the Liberals should be truly alarmed about that. This is something they need to get a handle on.

He goes on to say:

…the CPP doesn’t “help” you to save, it forces you to. If you’re already saving as much as you’d like to, it’s unclear why the government’s judgment should be substituted for yours; or if you’re already saving as much as you can afford to, forcing you to save more hardly makes you better off.

And so far as forced savings are justified, it’s never been clear why they must also be invested through the CPPIB….

The CPP II, as we will call it, is to be fully funded, and there are systemic risks that are associated with the portfolio as a whole. This fund has greatly increased these risks in the last years: 40% are now in private equity, illiquid assets like roads and bridges that are not traded on the public market.

Again, we have a pretty significant increase in the costs of managing this fund, and we have a very significant change in the risk portfolio.

There is nothing wrong with this if, one, all Canadians know what they are getting into; two, they can tolerate the extra risk; three, they have properly priced and accounted for it; and four, the returns are worth it.

The CPP, in Mr. Coyne’s opinion, met none of these tests and for the 19 million contributors—perhaps they are like me when I was a young adult—it comes off our paycheques and we really do not know what is happening with the funds.

The first thing the Liberals have failed to do is look at what is happening and what they need to do about it. We should not blindly move forward in giving a greater monopoly to the CPPIB without some careful review regarding the rapidly escalating costs and risks. What we are creating is a bit of a monopoly in terms of forced government savings.

In addition to the concerns I have just raised, and I think I shared some important information, I would like to give a couple of examples of how this forced savings program would have some negative impacts….

I have some relatives, a young couple, who have been saving for their first home. They both graduated from university and are saving for their first home. They live just outside of Toronto. They had the down payment and were all ready to go, then all of a sudden, the mortgage rules changed. Now that the mortgage rules have changed, they do not qualify for the amount they need to purchase this home. Not only has the government changed the amount they are going to have to raise for a down payment, it is making it more difficult for them to save. They were putting a couple of thousand dollars a year away to pay off their student loans and buy their first home, but all of a sudden, they are going to have to divert some of the money they have chosen to do something else with into the CPP, the mandatory payments….

In conclusion, I think the government is fixing a problem that does not exist. We have heard clearly that it does not exist. It is forcing Canadians to do something that perhaps is not their priority. We have entrepreneurs who could take that $1,000 a month, who are investors, who might have something else they could do with that $1,000, whether it is their own investment portfolios or investing in their businesses.

The Liberals are going to negatively affect the economy, and they have not fully assessed, in any comprehensive way in recent years, the escalating cost and the risk. I think the Liberals of today are very different from the Liberals of before. When CPP was first introduced, and we have heard this in the debate already, Judy LaMarsh, in 1964, stated:

It (CPP) is not intended to provide all the retirement income which many
Canadians wish to have. This is a matter of individual choice and, in the
government’s view, should properly be left to personal savings and private
pension plans.

The Liberals need to really reflect on the path they are going down, and we should all have very significant concerns.


About Mel Rothenburger (7581 Articles) is a forum about Kamloops and the world. It has more than one million views. Mel Rothenburger is the former Editor of The Daily News in Kamloops, B.C. (retiring in 2012), and past mayor of Kamloops (1999-2005). At he is the publisher, editor, news editor, city editor, reporter, webmaster, and just about anything else you can think of. He is grateful for the contributions of several local columnists. This blog doesn't require a subscription but gratefully accepts donations to help defray costs.

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