CARP extends its thanks to the nearly 4000 people who took the time to let us know what they thought of our proposal for a Universal Pension Plan. We brought your views to Ottawa to share them with the Finance Subcommittee last week when we argued for pension reform to protect the rights of retirees. The vast majority of CARP Action Online readers (88%) believed that there should be a supplemental Universal Pension based on the architecture of the Canadian Pension Plan. Almost all believed this plan should be funded by contributions from employers and employees (91%). There was a similarly high level of agreement that self-employed Canadians should be allowed to participate in the plan (93%).
About one half of you reported you would require 70% of your pre-retirement income to live on (53%), followed by about a third who said 50% would suffice. Most of you (50%) said you would be willing to contribute 10% (including the employer’s portion of your salary) to a pension plan for your retirement, followed by 23% who said they would contribute 5% and 17% who said they would be willing to contribute 18% (the current RRSP limit) or more.
It’s unclear whether all respondents understood that this percentage of income reflected both the employers as well as the employees’ contribution. If this what was understood, survey results may indicate a need for enhanced financial literacy. Studies repeatedly show that we are not saving enough for retirement. The good news is most respondents know that they needed about 70% of pre-retirement income to maintain their standard of living and that is in fact the general consensus amongst experts. Where we need more awareness is that it costs at least 18% [split between employer and employee] to fund a pension equal to 70% of pre-retirement income.
On the other hand, the current CPP only cover 25% of pre-retirement income and currently mandates a 9% contribution rate from employees and employers combined. Our calculations and those of the former CPP chief actuary indicate that a Universal Pension Plan would cost an extra 10%, thus bringing the total to 19% or 20%. Had these contribution rates been properly initiated from the inception of the CPP, 15% would have sufficed. The general consensus seems to be that in many cases, a savings rate of about 18% is required to maintain 70% of pre-retirement income into retirement.
Survey results are based on a self-selected sample of 3,940 members of CARP who received the organization’s online newsletter. Results can be said to be accurate within 2.2%, either up or down, at the 95% confidence level. That is, if all recipients of CARP Action Online who responded to surveys were asked these questions, their answers would be within 2% of those shown here, 19 out of 20 times.