The
Conservative government has
betrayed Canadians by
backing away from expanding
the Canada and Quebec
Pension Plans, which would
have made saving for a
secure retirement easier for
today’s workers and future
generations. At a meeting
with his provincial and
territorial counterparts in
June 2010, Finance Minister
Jim Flaherty was all for
improving CPP benefits on a
fully funded, go forward
basis. By December, he had
shifted his ground and
stated that he preferred to
hand over to the financial
services industry yet
another piece of the pension
pie in a proposal called
Pooled Registered Pension
Plans (PRPPs). But he still
promised to at least keep
CPP reform on the table. Mr.
Flaherty’s March 2011 budget
contained only a passing
mention to working on
options for an expanded CPP.
Even that tepid reference to
the CPP was removed when the
Conservatives released their
election platform on April
8. They say they will work
with provinces to create
PRPPs but improving the CPP,
it seems, is no longer a
priority.
How did this happen and why
does it matter? It matters
because we are facing a
crisis in retirement
security. Declining
workplace pension coverage
and low levels of private
savings mean that our system
is falling short when it
comes to maintaining living
standards in retirement.
Today, 1.6 million Canadian
seniors live in poverty,
with incomes below $16,000 a
year. The situation promises
to get worse in the future
because many young workers
are not able to save enough
for their retirement.
For that reason, the
Canadian Labour Congress has
been advocating on behalf of
all Canadians to improve
public pensions. The CLC has
proposed a gradual and
fully-costed doubling of
future CPP benefits so that
the plan replaces 50 per
cent instead of the current
25 per cent of earnings.
These improvements would be
funded by a modest,
phased-in increase in CPP
contributions paid for
equally by workers and their
employers. That would raise
the basic pension floor for
all workers from the current
level of $11,500 a year to a
far more livable $23,000.
This plan has been costed by
a former chief actuary for
the Canada Pension Plan, and
it is achievable.
The CLC campaigned hard
along with retirees’ and
citizens’ groups to promote
this much needed reform. A
majority of provincial and
territorial finance
ministers agreed with us,
although the Alberta
government was staunchly
opposed. Mayors and city
councillors meeting at the
Federation of Canadian
Municipalities' annual
meeting in May 2010 also
called for improvements to
the CPP. An October 2010
Environics poll showed that
78% of respondents supported
increasing CPP benefits.
So what happened? The banks
and life insurance companies
hate the idea of a better
CPP because they profit
handsomely by offering
retirement investment plans
that carry some of the
highest management fees in
the world. We believe that
these corporations got to
Jim Flaherty and Prime
Minister Harper and they
buckled. We made a request
for documents under the
Access to Information Act.
Although much of the
information we sought was
withheld or heavily
censored, it is clear that
industry representatives
lobbied the Finance
Minister. For example, the
Great West Life Assurance
Company complained in a
letter to the minister that
background documents
prepared by his department
last December drew too much
attention to the fees
charged by actively managed
mutual funds. The government
department obligingly
removed the offending
language.
The most effective, low-cost
way to provide adequate
retirement income for all
Canadians is to expand the
existing CPP. If we fail to
act, inadequate pensions
will cost taxpayers a lot of
money down the road. We will
have to keep raising the
guaranteed income supplement
(GIS), paid to low income
seniors. Projections
indicate that the cost of
providing GIS will rise from
$9.2 billion in 2011 to
$22.2 billion in 2030. That
will represent an important
and growing burden on public
finances. Tinkering with the
GIS is not the answer. The
money raised to provide
decent incomes for retired
people should come from the
workplace. An improved CPP
won’t cost the government a
penny because the CPP is
paid for by workers and
their employers. That is the
only way to provide pensions
which are defined, indexed
and secure. No senior
citizen in Canada should be
poor.
The Conservatives have
backed away from
improvements to the Canada
and Quebec Pension plans. In
doing so, they failed to
support an option that the
other political parties,
local governments, a
majority of finance
ministers, and credible
researchers all agree is the
best way to go.