Compulsory Government Pensions vs. Private Savings: The Effect of Previous Expansion to the Canada Pension Plan

In recent years, there has been a strong push to expand the Canada Pension Plan (CPP). Ontario has already set out a plan to create an additional mandatory provincial program mirroring the CPP called the Ontario Retirement Pension Plan (ORPP), which is slated for implementation on January 1, 2017. Yet the debate about expanding compulsory public pensions has largely overlooked important consequences for private savings, and thus may have overstated the benefits of such a policy move.increases in the compulsory CPP contribution rate were followed by decreases in the private savings rate of Canadian households. This drop in private savings is not explained by changing interest rates or shifts in demographics such as age, income, or home ownership and thus must be examined before expanding the CPP or ORPP.

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