Cut CPP to Cut the Deficit?
Jeremy Leonard, research director of IRPP, suggests in today’s Globe that CPP retirement benefits be cut to balance the federal books, or at least he is cited to that effect by Barrie McKenna.
â€œThat doesnâ€™t mean there arenâ€™t major savings to be wrung out of spending. Mr. Leonard, for example, suggested that reforms to the Canada Pension Plan could achieve the dual goals of saving money and encouraging older workers to stay in the work force longer. Ottawa could do that by reducing benefits for those who take early retirement, while boosting benefits for those who retire after 65. Mr. Leonard said that could produce several billion dollars in savings.”
Not only is that a bad idea on its own merits, it doesn’t make sense unless the CPP premium is turned into a general source of revenues as happened with EI premiums during the Chretien- Martin years. Currently, CPP premiums are set by the Chief Actuary and paid into a trust fund to pay benefits, so any cut to benefits would result in a premium cut,Â not an increase in Government of Canada revenues.
Mr Leonard also seems to have missed the point that one no longer has to cease work to collect a full or partial CPP benefit. Increasingly, seniors are combining CPP and wage income. As he surely knows, the CPP has already been recently rejigged in line with new actuarial calculations of costs to somewhat lower CPP benefits if taken before age 65, and to somewhat raise them if taken after age 65.
As I have noted before, raising the retirement age would be deeply unfair to lower income workers who have not shared the longevity gains of the more affluent.
I think he might have meant that the retirement age could stay at 65, but that that the benefit reduction for early retirement could be increased (steeper reduction), and the benefit increase for late retirement could also be increased (steeper increase). Neither of these changes would require CPP to be turned into a source of general revenue.
However, since those changes were already put through last year, if that’s what he meant I think his information is out of date.