Opposing views aired on effect of fee increases

Premium hikes are necessary to maintain services: economist

  • Jan. 3, 2012 3:00 p.m.

Rudy Haugeneder

News staff

Despite keeping more money out of people’s pockets, premium increases for Canada’s social safety net – Canada Pension Plan, Employment Insurance, Medicare – are necessary to keep them meaningful, financial experts say.

Helmut Pastrick, chief economist for Central 1 Credit Union, the central financial association for B.C. and Ontario credit unions, said the pension plan premium increases are necessary to offset stock market losses in recent years and to pay the growing number of baby boomers who will rely on it when they retire.

If premiums into the self-funded plan were frozen at the current rate, he said, the pension benefits would not increase in the future and might even shrink.

Travis Koivula, a certified financial planner with Island Savings Credit Union in Victoria, said CPP is “a primary source of retirement income” for most seniors – now and in the future.

Canada Pension Plan, administered by an independent financial investment management board that invests the assets to earn money to pay pension benefits, must “increase premiums or cut benefits,” he said. That’s something retired people can’t afford when they’re not working, he added.

“Most people take far more out of CPP than they put in over the years.”

It is important younger people contribute more, to not only secure their own retirement futures, but take care of their parents and grandparents, Koivula said.

No one likes to see their payroll deductions increase for CPP, EI or the provincial Medical Services Plan, he said, especially since average wages haven’t increased. “But if rates didn’t increase, the long-term viability of Canada Pension could suffer.”

Pastrick agreed, adding the same applies to MSP and EI premiums.

B.C. Medical Services Plan premiums rose six per cent on Jan. 1, meaning a family of three or more will pay $128 monthly – up $7 from last year and $84 for all of 2012.

Federal EI and CPP premiums will increase collectively by $306 per employee this year, with just under half paid for by employees themselves.

The Canadian Taxpayers Federation and Canadian Federation of Independent Business say the increases are little more than taxpayer gouging and will prevent job growth.

Taxpayers federation B.C. director Jordan Bateman said the increases will hurt the economy because “families and seniors are already finding it difficult to keep up with rate increases at B.C. Hydro, ICBC, B.C. Ferries and tax hikes at the gas pump.”

Federation of Independent Business B.C. chapter spokesperson Shachi Kurl described the CPP and EI rate hikes as payroll taxes that “make it harder for small business to create new jobs” during tough economic times.

While her organization successfully lobbied the federal government to keep EI rate increases at half of what were planned, she said governments are “insensitive to (the) profits small businesses need to survive.” She added the increases come at a time when Canadians can least afford them.

Bateman said all levels of government, including municipal and regional governments, “are treating the taxpayer like an ATM, taking money from them hand over fist.”

People who complain about increased premiums do so without understanding their impact on critical social safety net services which “for the most part they are getting full value for,” Pastrick said. “Most people look at the cost side and don’t think of the benefit side,” he said, “The alternative (to these services) is much worse in social terms.”