Critic blasts CPP policies

The CPP has opened the door to political interference by adopting a new policy on socially responsible investing, says the federal director of the Canadian Taxpayers Federation. John Williamson also wants to see a change in the way CPP surplus is distributed.

Williamson says he believes the CPP’s recently-announced social investment principles are “bad policy” because they use the “strong arm of the state” to enforce mandates. “This is not the role our pension funds should take,” said Williamson, speaking on Thursday in Toronto to members of the Canadian Pension and Benefits Institute.

He predicts that because of the CPP’s inclusion of shareholders in the investment decision-making process, the door has been flung open to potential political interference in the future. “If we go down this path, federal and provincial politicians could use these funds to help their economies develop,” he says. “We need to put our savings in a box that can’t be touched.”

Still, as one audience member noted, the CPP, though accountable to the federal government, has a strict policy of non-political interference.

Williamson also takes a contrary stance when it comes to the issue of CPP surplus. Currently, he points out, only four million Canadians are collecting CPP, yet the contribution rate — initially set at 4.2% — has been around 7% or 8%. That means that by 2025, there will be three workers to one retiree, and lots of surplus in the plan.

This, Williamson maintains, is unfair to younger generations who are paying for the pensions of older workers, but will not receive the same benefits at retirement as those CPP members, the baby boomers, who will soon be retiring. For that reason, a change in surplus distribution is needed, he said.

Williamson advocates the CPP follow in the footsteps of other countries like Australia, Britain, Denmark and Chile and work out a public/private partnership that would involve keeping CPP funds under the investment board’s management but transferring the surplus into funds in which individual members can save their personal retirement assets.

This would augment retirement savings and ensure the CPP’s surplus is not used to a political end, he argues. He proposes the federal government back the retirement savings approach that this would fuel.

“I’d like people to say: ‘I have this fund, I have this money,'” says Williamson. “Canadians should retain some ownership in that investment.”

Filed by Anna Sharratt, managing editor of Benefits Canada

(11/04/05)