Helping the banks is not the way to go

Lana Payne
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No doubt about it: the banks are a hypocritical, self-serving bunch.
Most of you probably know this based on your own experience.
But the financial sector has been doing a particularly good job of exposing its underbelly during the current debate in the country over retirement security for Canadians.
On the one hand, they coyly blame Canadians for not saving enough for retirement and say our school system should be teaching youngsters how to save.

Urging spending
But as soon as those youngsters hit the age of majority or are registered for post-secondary college or university, the banks throw credit cards with usury-like interest rates at their feet. No job required.
Perhaps if they were truly concerned with the savings and retirement of Canadians they wouldn't hand out credit cards like candy or charge ridiculous fees for managing registered retirement savings plans (RRSPs) and other tax-saving vehicles.
They complain the whopping $18 billion that taxpayers subsidize the 30 per cent of Canadians who can actually afford to contribute
to RRSPs and tax-free savings accounts every year is just not enough.
The banks would like Canadians to be able to contribute more and longer to RRSPS and reduce the taxes on those RRSPs when they withdraw from them - in other words, more money for the banks.

RRSPs are for the wealthy

Given that the majority of RRSPs are purchased by the Canadians in the top 20 per cent income bracket, these changes are really about helping the wealthiest among us.
They say, in a brief to the federal government, that there is no crisis in Canada's pension system and that all is needed is for public policy to "build upon the confidence Canadians have in their financial institutions."
Now that is a rather bold assumption.
Indeed, one might argue that Canadians' confidence in our banks and financial institutions - despite daily assurances from the federal government that our banking system is the strongest in the world - has been quite shaken by the recent financial crisis.
The Canadian Bankers' Association's conclusion that there is no crisis in our retirement system suits is also self-serving.

Look at the facts
The facts say otherwise. Over 60 per cent of Canadians have no workplace pension plan - nearly 11 million working Canadians.
Only about 30 per cent contribute annually to RRSPs and over one-third of us have no savings outside the public system of the Canada Pension Plan, Old Age Security and the Guaranteed Income Supplement.
Numerous studies say Canadians are not saving enough for retirement, that our savings rate is declining and has been declining since the 1980s.
The labour market is more and more precarious - despite claims that we are in for a labour market crunch when all those baby boomers retire.
A full 36 per cent of Canadians are employed in precarious work, otherwise known as non-standard, part-time, temporary employment with lower-than-average wages and few, if any, benefits.

Debt rising

According to the Vanier Institute of the Family, household debt has risen to 145 per cent, which means Canadian families are spending a lot more than they are earning.
And no wonder when, despite a recession, the cost of housing in every jurisdiction in the country has increased.
In our own province, the cost of a home increased by 22 per cent from January 2009 to January 2010.
All of these facts point to a crisis in the retirement security of Canadians or at the very least they point to a looming crisis.
Currently, the federal government is holding two sets of consultations - one on retirement and another on financial literacy.

Strange choice
The federal task force on financial literacy is headed up by Don Stewart, the CEO of SunLife - the biggest insurance company in Canada. He earns over $6 million a year, according to a list of the highest paid CEOs compiled by the Canadian Centre for Policy Alternatives.
In his remarks in the task force consultation document, Stewart proclaims that "the recent economic downturn - and its impact on Canadians' financial security - has highlighted the need for personal financial savvy."
This piece of condescending, elitist nonsense misses the entire point of the economic crisis.
All the personal financial savvy would not have prevented the most stunning stock market meltdown in generations.
Not even the high priests of the financial world predicted the disaster which wiped out hundreds of billions of dollars in pension funds and RRSP assets virtually overnight.
And despite Stewart's assertion, the recent economic crisis did not highlight the need for more personal financial savvy. It exposed the flaws in Canada's social safety net and in our retirement system.

Build a better system

It's time to stop blaming the victims of this financial and economic crisis and start putting in place a sensible retirement option for the vast majority of Canadians - not the richest 20 per cent who don't have to worry about retirement.
The answer is to build on what we have - by improving OAS and GIS so no Canadian senior is living below the poverty line, and by doubling the replacement rate on CPP.
CPP is portable, indexed and a low-cost savings option for the vast majority of Canadians. We do not need to do more for the banks and financial sector or reinvent the wheel, just finetune it.

Lana Payne is president of the Newfoundland and Labrador Federation of Labour. She can be reached by e-mail at Her column returns May 22.

Organizations: Old Age Security, Vanier Institute of the Family, Canadian Centre Stewart's Newfoundland and Labrador Federation of Labour

Geographic location: Canada

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