The CPP's 'original sin' is coming back to haunt it as Alberta considers exit
When the Canada Pension Plan was introduced to Canadians in the 1960s, it was sold as an alternative to a fraying old-age security program that guaranteed only $75 a month and had run up a $670-million deficit.
The new national pension scheme was to be built from contributions taken off the paycheques of all working Canadians and was intended to provide a basic guaranteed retirement income to everyone who contributed.
“The Canada Pension Plan will not build up a huge investment fund in the hands of the federal government,” Judy LaMarsh, minister of health and public welfare, toldthe House of Commons in July 1963 amid some confusion over how the fund would work and fears that it might usurp existing private retirement plans.
“Instead, it will be financed on a pay-as-you-go basis,” she said, meaning each year’s pensions would be largely paid out of funds contributed by those still working that year, with a small carry-over reserve to keep the plan running smoothly.
A lot has changed in the 50-plus years that followed. But to make the transition palatable in those early days and bring as many provinces as possible on board, workers and their employers were only required to start contributing 1.8 per centof the employee’s paycheque each to the new national scheme. In return, Canadians were guaranteed retirement benefits of 25 per cent of the average pensionable earnings, adjusted to inflation.
It was a sweet enough deal to win the buy-in of nine provinces, with just Quebec opting out to create its own retirement plan. But it was particularly sweet for the first generation of contributors, who only had to pay those modest amounts for a decade in order to qualify for the maximum pension.
But those early windfall
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