Pensions and true progress

Lana
Lana Payne
Send to a friend

Send this article to a friend.

It is an idea whose time has come. And we can thank the global financial meltdown, stock market crash and the subsequent economic crisis for it.

That's the notion of a stronger public pension system in Canada.

It will be a tough pill for the federal Conservatives to swallow, especially given Ted Menzies' opposition to mandatory retirement schemes. Menzies is Finance Minister Jim Flaherty's Parliamentary Secretary and he's heading up a federal-provincial review of pensions.

It is an idea whose time has come. And we can thank the global financial meltdown, stock market crash and the subsequent economic crisis for it.

That's the notion of a stronger public pension system in Canada.

It will be a tough pill for the federal Conservatives to swallow, especially given Ted Menzies' opposition to mandatory retirement schemes. Menzies is Finance Minister Jim Flaherty's Parliamentary Secretary and he's heading up a federal-provincial review of pensions.

But he's made it pretty clear that he thinks people should save for their own retirement rather than enhancing the mandatory pension system we currently have. It's this "you're on your own" attitude that is part of the problem. And if nothing else the current economic crisis has exposed the failure of that ideology and that approach to retirement security.

Bigger problem

Susan Eng, a pension reform advocate with CARP, a national seniors' advocacy group, has been critical of the review which proposes what she calls minor tinkering with CPP.

The problem with Canada's pension system, she says, is a lot bigger than that and more reform is needed to ensure seniors can live in dignity after a lifetime of work.

The maximum retirement benefit from our public pension system (CPP, OAS and GIS) falls far short of replacing the up to 50 per cent to 70 per cent of a person's pre-retirement income needed to maintain a decent standard of living in retirement.

And, unfortunately, the private part of the pension system in Canada, whether it is through an employer-sponsored pension plan or RRSPs, is not doing its part.

Too few workers are covered by employer-sponsored pension plans and too few Canadians are saving enough or are able to save enough through the RRSP system.

Stock crash a serious blow

Add in the recent stock market crash which resulted in the loss of hundreds of billions of dollars in RRSP and pension plan assets, and the number of employers filing for bankruptcy and reneging on their pension commitments, and we have a pension crisis on our hands in Canada.

Here's the problem. Only one in five workers in the private sector belong to an employer-sponsored plan. Almost one in three Canadians has no retirement savings at all.

It's partly because in the past three decades their wages and incomes have not been growing in any real way, just keeping pace with inflation. It's hard to save when the bills keep getting bigger and the pay cheque not so much.

Those who have private sector pensions are likely in a union. For decades pensions have been priorities at the bargaining table. Low pension coverage is in no doubt related to decreasing union density in the private sector.

Union numbers shrinking

In the private sector, less than 20 per cent of Canadian workers are organized in a union. Anti-union labour laws in nearly every province of the country have resulted over the years in fewer workers joining unions.

And in far too many workplaces, unless an employer is forced through collective bargaining to implement a pension plan, they do not.

At the same time as union density has declined, private sector workplace pension coverage has dropped like a stone from 30 per cent in 1991 to 23.7 per cent in 2006.

According to a recent report by the Organization for Economic Co-operation and Development, the stock market collapse has had a profound effect on private sector pensions which had a dreadful year in both 2008 and so far this year. According to the report, pension plans in Canada lost a whopping 21.4 per cent in 2008, well above the average loss of 17 per cent in OECD countries.

Canadians also depend heavily on private sector pension plans or savings, more so than citizens in any other OECD country, including the United States.

Private financial sources making up 50 per cent of retirement savings in Canada compared to an average of 20 per cent in other countries.

Premiers concerned

While Mr. Menzies and the federal Conservatives aren't all that keen on doing something about this problem, the premiers have other ideas. At their recent meeting in Regina, they agreed with a position being put forward by the Canadian labour movement and organizations like CARP for a national summit on pensions to be held by 2010.

Mr. Menzies actually told the Globe and Mail in an interview this past summer that he wasn't even sure there was a pension problem that needed fixing. And that he wasn't that in favour of a mandatory expansion of retirement savings that would see Canadians paying more through CPP premiums, but also collecting more in retirement.

He noted that this struck him as "a bit of a nanny state situation."

Yet even the chief economist with the TD Bank has said that private savings are just not working.

In a speech this month to Queen's University, Don Drummond noted that RRSP contributions are very low with only 31 per cent of tax filers making contributions in 2007 and contributions representing just six per cent of the room available for filers. "This points to a possible government mandate to ensure adequate income security during retirement."

Pensions still intact at the top

Perhaps Mr. Menzies should be more concerned with taking care of nanny (and poppy) than creating a "nanny state."

After all, he doesn't seem to mind his generous MP pension plan. Perhaps what he means is the nanny state is not for everyone - just politicians and CEOs - neither of whom have a problem with their gold-plated pensions.

(As my next column appears after Labour Day, I take this opportunity to wish you all a safe Labour Day weekend.)

Lana Payne is president of the Newfoundland and Labrador Federation of Labour. She can be reached by e-mail at lanapayne@nl.rogers.com. Her column returns Sept. 12.

Organizations: Conservatives, OECD, Organization for Economic Co Globe and Mail TD Bank Queen's University Newfoundland and Labrador Federation of Labour

Geographic location: Canada, United States, Regina

  • 1
  • 2
  • 3
  • 4
  • 5

Thanks for voting!

Top of page

Comments

Comments

Recent comments

  • sandra
    July 02, 2010 - 13:30

    get your self a goverment job if you want a pensios so all canadians can pay you from the tax they pay

  • sandra
    July 01, 2010 - 20:19

    get your self a goverment job if you want a pensios so all canadians can pay you from the tax they pay