Small business group says early retirement incentives should go
A recent report by the Canadian Federation of Independent Business (CFIB) has once again triggered a storm of words between the business lobby group and several of Canada’s largest unions.
The CFIB surveyed 7,872 members this spring on the subject of pension reform. The report, Securing Our Future, found that 71 per cent of small- and medium-sized businesses do not support an increase in mandatory contributions.
Seventy-eight per cent of employers said they don’t offer a retirement program, citing a high tax burden as one of the biggest disincentives.
“Entrepreneurs already pay double the rates of other Canadians and they would be faced with massive increases if this option is considered,” said CFIB president Catherine Swift.
The Canadian Labour Congress (CLC), an umbrella labour group representing more than three million workers, wants to see CPP benefits doubled, Guaranteed Income Security for seniors increased by 15 per cent and the introduction of federal pension insurance.
The CFIB, meanwhile, is calling on both levels of government to raise the contribution rates of public service pension plans and remove incentives for early retirement. The lobby group also wants to see tax “disincentives,” such as making RRSPs subject to payroll taxes, eliminated while expanding incentives, such as employer tax credits for contributions.
Swift recently presented the CFIB’s findings and recommendations in a letter to the federal and provincial finance ministers in June prior to their meetings on pension reform. She said it’s unfair that almost half (49 per cent) of all small business owners say they can’t afford a retirement plan for themselves or their employees, while paying toward the pensions of public sector workers.
“It is ludicrous that the private sector continues to pay tax dollars to support these gold-plated pensions to which they will never have access,” said Swift.
John Gordon, president of the Public Service Alliance of Canada (PSAC), said business owners, regardless of size, have a moral obligation to pay more toward the national pension plan.
“They ought to stand back and see who makes money in their businesses,” he said. “They make their profits off money spent by all members of society. They should be putting something back into that society to make sure their workers have a decent retirement income.”
Gordon said the reality is that many Canadians can’t, or don’t, save enough money towards retirement; the CPP is a forced initiative that protects everyone.
“We’re not talking about a huge amount of dollars here,” he said. “We’re talking about a reasonable amount of money that’s providing security in retirement at a very reasonable rate.”
Gordon said he is “puzzled” by the CFIB’s recommendations on public pensions. He says federal public sector workers’ contributions are increasing and will settle at 40 per cent in 2012–13.
He is also concerned about the proposal to remove early retirement incentives.
“The reality is that most people don’t retire early at 55,” he said. “Sixty is the number at which people can retire with an unreduced pension. It’s a healthy thing to have a workforce that turns over.”
The CFIB report also calls for greater transparency and solvency rules for public sector pensions. Gordon says the issue is a “bit skewed.”
“The bankruptcy of the Canadian government is probably not on. It’s not going to happen,” he said. “Not in the same way as you’ll find bankruptcies in a variety of businesses from time to time.”
Federal finance minister Jim Flaherty is recommending financial institutions be given the regulatory freedom to provide more pension options at low cost, targeted at self-employed people, small business owners and workers not covered by employer plans.
Flaherty also supports a gradual and moderate expansion of the CPP, but he has not detailed how much benefits could increase or premiums might rise.
