Evidence for CPP expansion now is overwhelming
Contrary to the Fraser Institute’s position on expansion of the CPP (Those pushing pension plan expansion should be cautious, Vancouver Sun November 6, 2013), the evidence for expansion now is overwhelming. To put things into perspective, Sean Speer, one of the authors from the Fraser Institute, was of late a senior policy advisor in the PMO. Is the PMO raising a trial balloon to see if he can get away with ignoring calls for improving retirement security? Or is the Fraser Institute simply confirming their bias to public programs?
An old friend told me many years ago that it’s often not what’s in the media that’s important compared to what’s not in it. The Fraser Institute neglected to mention that the PEI/Ontario plan proposes exemptions of increased CPP premiums for those earning $25,000.00 or less a year. They will pay the same premiums they do now and receive the same benefits they have now. Only higher income earners will pay more and receive more.
Let’s look at some facts:
• Statistics Canada reported that Canadians contributed less than 4.5% of their entitled RRSP contribution room in 2011.
Even if an increase in CPP payments will further reduce RRSP contributions, (merely an unproven assumption) it will affect less than 1% of working Canadians. Relying on Canadians contributing to their RRSP’s as a means to ensure adequate retirement income is a fallacy.
• A BMO Wealth Institute study found Canadian baby boomers unprepared financially for retirement. Boomers feel they need on average $658,000 for retirement but they save on average $228,000. According to the same study, almost half (46%) of boomers were not confident they will be financially secure in retirement.
• According to StatsCan, two thirds of the workforce do not have registered pension plans. The trend among employers with pension plans is to offer only defined contribution plans where payouts suffer the vagaries of the financial markets, rather than defined benefit plans which guarantee promised payments. Another market meltdown like 2008 could render defined contribution plans grossly inadequate.
• In a Canadian Institute of Actuaries study, 50% of pre-retirees admit to being unprepared for retirement and 72% are concerned about “maintaining a reasonable standard of living for the rest of their lives”.
• A C.D. Howe Institute report projected that 44% of 25 to 30 year-olds would risk a marked reduction in their standard of living after retirement if present trends (lag in economy and earnings, declining share of private sector workers participating in registered pension plans) continue.
These facts disprove Jack Mintz’s and the Fraser Institute’s conclusion that the Canadian retirement income system is performing well.
So the need is real . . . and the need is urgent. Saying the economy is too weak to let people take $400.00 a year out of their spending is at best ingenuous – the added sense of security from a better-secured future is more likely to free up spending.
The extremely low voluntary contribution to RRSP’s proves that most people will not adequately prepare for their retirement unless required to. Voluntary plans simply do not work.
It’s time for all provinces to vote in favour of increased CPP benefits when they meet in December. To do anything less is to tell younger people they don’t matter; they can expect a bleak financial future when they retire. A recent CARP poll revealed that our members strongly support enhancing CPP now, even though they will not personally benefit from the change. They have seen through the duplicity and are prepared to vote their interests.
CARP is a national, non-partisan, non-profit organization committed to a New Vision of Aging for Canada. Our mandate is to promote and protect the interests, rights and quality of life for Canadians as we age.
Bruce Bird, Chair
North Fraser Chapter CARP (A New Vision of Aging for Canada)