Monday, December 20, 2010

The Alberta tail wags the federal dog

It seems that Alberta's opposition is enough to convince the Harper government to shelve the proposed expansion of the CPP:

Provinces are planning to fight for enhancements to the Canada Pension Plan at a key meeting on Monday, setting up a showdown with the Harper government over how Canadians will fund their retirements.

Just days before federal and provincial finance ministers meet in Kananaskis, Ottawa made a surprise move to reject CPP enhancements for now in favour of a new privately run savings vehicle.

The shift in federal priorities on pension reform comes as the Bank of Canada heightens its warnings that Canadians are borrowing too much and saving too little, putting some households at risk when interest rates inevitably climb back from near-record lows.

Ottawa’s critics insist long-term pension problems must be tackled now and premium increases can be phased in, but the Harper government is aligning itself with Alberta in arguing the economy cannot absorb a new hit on the take-home pay of Canadians.

From the Globe. No doubt the feds (and Alberta) like the private-sector nature of the new proposal; from the average citizen's point of view, though, the most significant feature is the fact that it would be a defined contribution plan, unlike the defined benefits provided by the CPP. It's trendy these days to call defined benefit plans "gold-plated pensions"; I suggest that a more appropriate term would be "galvanized", since they protect your pension from corrosion.

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