MEDIA RELEASE - Retirement of the ORPP a Positive, but Strong Caution Needed on Federal Pension Reform
For Immediate Release
June 21, 2016
Retirement of the ORPP a Positive, but Strong Caution Needed on Federal Pension Reform
Sault Ste. Marie – After close to a year of calling for details and clarity on the proposed Ontario Retirement Pension Plan (ORPP) by the Sault Ste. Marie Chamber of Commerce, by Chambers and Boards of Trade from around the province and by a coalition of major Ontario employers, the ORPP seems destined to be retired itself following the announcement that most of the country’s provinces had reached an agreement with Ottawa on Monday that will eventually increase contributions and retirement benefits through the federal public plan.
Ontario Premier Kathleen Wynne indicated Tuesday that there is no need for Ontario to proceed with the separate provincial retirement pension option noting that a better Canada Pension Plan (CPP) negates the need for the planned ORPP.
According to Sault Ste. Marie Chamber of Commerce President Monica Dale, “the announcement is a double-edged sword… The ORPP represented a significant red-tape and financial challenge for Ontario’s businesses. Our view has always been that it would be preferable for the federal government to improve the CPP program rather than create a duplication of government services. Unfortunately, if the provinces and federal government could have gotten onto the same page sooner, it could have saved millions in Ontario tax dollars spent planning, managing and promoting a program that, it now appears, will never see the light-of-day.”
The Ontario Chamber of Commerce indicates that it also views a reform of the CPP as preferable to a secondary, provincially-managed plan. Allan O’Dette President & CEO of the Ontario Chamber of Commerce (OCC) states that the organization is “encouraged by the finance ministers’ decision to move ahead with national pension reform. A province-by-province approach would have increased regulatory fragmentation and thus administrative burden. Ontario is doing the right thing by moving away from the ORPP in order to support a coordinated solution.”
While Ontario appears poised to avoid the implementation of the ORPP, strong concern still remains on the bottom-line impact that pension reform will ultimately have on the economy and on job creation.
SSMCOC Executive Director Rory Ring notes that under the current CPP, employers and employees each contribute 4.95% of a salaried person’s earnings between $3,500 and $54,900, up to a yearly maximum of $2,356.20. Self-employed workers must pay both portions for a total of 9.9%. The new agreement reached between the provinces and federal government would see the upper salary limit eventually increase to $82,700, and aims to move from a CPP payout of 25% of earnings to a 33% payout.
Ring states that “CPP rates will have to increase if the income replacement rises from one quarter to one third and ultimately, this is going to leave businesses with far fewer dollars to hire, expand and innovate. It also means that the average Canadian worker is going to have fewer dollars in their pay cheque, which they count on and which business counts on to stimulate the economy.”
The SSMCOC strongly encourages the Federal government to undertake a cost-benefit analysis on the implementation of pension reform to help guide the changes in a way that benefits Canadians saving for retirement while minimizing negative impacts on the economy and job creation.