Flaherty’s Inferior Pension Plan (FLIPP)

Here are the CLC’s Q and As re proposed Pooled Registered Pension Plans.

Basically they are like group RRSPs, but sponsored by a financial institution with a fiduciary responsibility as opposed to an employer. They may be somewhat lower cost than individual RRSPs, as with current group RRSPs. However, there will be a lot of such plans, with different investment options, so large economies of scale will not be reached.

Unlike the CPP, there is no mandatory employer contribution; no defined benefit based on career average earnings; no inflation protection,; and no assurance of full portability.  Costs, including financial institution profits, will lower returns considerably compared to the CPP alternative.

Would such plans  gain a lot of members? Enrollment of employees could be mandatory, at the discretion of a province, but almost certainly with an opt out provision.  Some individual RRSP accounts could be transferred to new, larger pools.

At best, a very poor alternative to CPP expansion.

Why are we getting this instead of CPP expansion?

The excuse is that CPP expansion should await better economic times – even though a CPP premium increase would be phased in only slowly, and not for a couple of years pending approval by the federal government and the provinces.

The reality is that CFIB opposition to an increase in mandatory employer contributions, plus financial insurance insistence on a private plan, have temporarily trumped advocacy for an expanded CPP.

Still, seven provinces favour CPP expansion, and the issue is not going to go away.


  • I have a beef about the CPP issue that never seems to come up. As I understand it, CPP is like a Ponzi scheme; today’s young pay for today’s retired (as opposed to today’s young pay for tomorrow’s retired — i.e. themselves).

    If that’s the case, enriching CPP benefits would give a free ride to boomers who are retiring soon — they’ll get richer benefits without having to have contributed for it. It wouldn’t totally be at the expense of today’s young, because we’ll (presumably) get the richer benefits when we’re old. But boomers, who already racked up big debts in the ’80s which the current youth will have to pay off, will get another free ride.

    And that’s not fair.

  • Anon – you are mistaken. Under current legislation, any improvement of CPP benefits must be fully pre funded ie there will be no subsidy to ageing baby boomers such as myself who will benefit only marginally in any case since the improvement would take 40 years to fully mature.

    The CPP was indeed originally set up on a pay as you go basis, and there as a big cross generational subsidy to those who retired in the early history of the Plan – the Depression generation who deserved some reward, in my view. The current premium rate is about 3% of earnings more than needed on a go forward basis, and the difference is intended to make up an actuarial deficit and ensure that baby boomers lie myself are not imposing too great a burden on younger folks.

  • Great post title!

    I also liked what Nova Scotia’s Finance Minister said in The Globe and Mail:

    Nova Scotia Finance Minister Graham Steele said he finds it surprising that the federal government is presenting the private-sector option as an alternative to enhancing the CPP.

    “No one has suggested that you have to pick one or the other,” he said. “It is simply perplexing and disappointing to hear the discussion being framed that way.”

    Creating another option for voluntary savings with greater economies of scale is probably a good thing. But it does not diminish the rationale for increasing CPP benefits. These two proposals are not mutually exclusive.

  • Thanks Andrew! That’ll help me sleep a little better at night 🙂

    Proponents of enriching CPP should stress this point.

  • If a privatized plan is implemented that will be the excuse not to enhance CPP.

  • The great pension burden for the next generation is not the cost of increased cpp contributions.The real burden is the 3.5 million defined pension plans of goverment employees.This is a 20 billion annual cost to taxpayers.For example the ontario teachers pension plan has a several billion dollar shortfall in 2010.The ontario taxpayer is responsible for this .Come on man.There is 100billion dollars in this plan for only 500,000 employees.The total cpp assets are 132billion for almost 20million workers.Come on man.A lot of these retired goverment employees are retired longer than they worked.These government defined plans will cost the next generation 100s of billions of tax dollars.COME ON MAN.This issue is not even being addressed.WHY? The people deciding pension reform are the same people who recieve the benifit of these goverment defined plans.WHO else can retire in their 50s with full benifits tied to inflation forever.COME ON MAN.The time has come for a structural reform for equality regarding CANADIANS PENSIONS.Let us not forget that many of these retired goverment workers CONTINUE to work in their industry ie,the teaching profession.These double dippers ARE PREVENTING thousand of young teachers from entering the job market.As you can see .The defined goverment plan allows abuse and greed to prevail.

  • Well said Richard….

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