The federal government is too generous in subsidizing public service pensions and its time to start levelling the playing field with the private sector, the Canadian Federation of Independent Business says. “The federal government uses taxpayer dollars to ever-so-generously outmatch its employees’ pension contributions,” the CFIB said Tuesday in a submission to the federal government’s consultations on the retirement income system.
The report noted that federal civil servants contribute only 34 per cent of the cost of their pensions compared with much higher levels in many provincial and private-sector plans. “Hard-working lower- and middle-class Canadians in the small business sector should not be subsidizing the generous retirements of public servants, most of whom do not even contribute anywhere near an equal share of their own retirement packages,” CFIB president Catherine Swift says in an accompanying news release.
One of the recommendations in the CFIB report is a gradual increase in the federal public sector pension contribution rate to 50 per cent for employees, “the ratio most commonly used at the provincial level.”
“This would not only act as a fairness measure, but it would also make the federal public sector pension system much more financially viable in the long term,” said the CFIB, which represents thousands of small- and medium-size businesses in Canada.
The CFIB report, called Securing the Future, highlights the inequities federation sees between public sector plans and those in the private sector and is based on the responses of 7,872 small- and medium-sized business owners.
— The Canadian Press
According to the report, 79 per cent of the respondents indicated that they did not currently offer a retirement savings plan, such as RRSPs or a Registered Pension Plan.
“The main reason for not offering a plan is that they are too expensive,” it said.
“The second most common reason is that it is too complicated to administer. This suggests that, at a time when proposals for mandatory increases to payroll taxes such as CPP/QPP premiums and benefits are being put forth, many owners simply cannot afford such pension initiatives.”
Besides raising public sector contribution levels, the CFIB report recommends phasing out early retirement incentives in the public sector and making such plans adhere to the same rules and disclosure requirements as private-sector plans.
It also wants a halt to increases in mandatory Canada Pension Plan and Quebec Pension Plan contributions and for governments to offer incentives to increase private-sector pension coverage rather than mandating it.
“Prior to the adoption of any other changes to the retirement income system, governments should make finding ways to re-establish a level playing field between the public and private sector a top priority,” Swift said.
“Once that has been achieved, addressing other issues will be much easier and fairer,” she said.