Grasping a true pension solution

Lana Payne
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As world financial markets had another tumultuous week, plummeting for a few days, wiping out billions of dollars in savings, and then only slightly rebounding, Canadians were reminded once again that leaving retirement security up to a gambler’s vagaries provides no security at all.

By now, given the market meltdown of 2008 and 2009, and last week’s craziness, the lesson for how we deliver retirement security should be very clear.

Unless you are Ted Menzies, Finance Minister Jim Flaherty’s secretary of state who has also taken on the role of cheerleader for big banks, insurance companies and the Canadian Federation of Independent Business.


Pumping it up

Menzies is doing Canadians a disservice by pumping his glorified RRSP or pooled pension plan option during a cross-country tour and leaving the more stable and sensible solution to pension reform off the table — enhancing the Canada Pension Plan.

But then we should not be surprised.

Menzies, despite all the evidence and support from pension experts, has consistently dismissed improving CPP.

His opposition is mostly ideologically based. In his mind, retirement savings should be voluntary, rather than mandatory; employers should only contribute if they wish; and people should fend for themselves rather than relying on a collective approach to retirement security.


Blind to reality

This ideology ignores reality. Experts say a decent retirement income is equal to about 70 per cent of a person’s working income. That means people have to start saving in their 20s. Young people have other priorities — like paying off student debts, buying their first home and starting a family. There isn’t anything left over to save.

The only saving is through contributions made to CPP and only then because they are mandatory, paid by employees and their employers. The issue is CPP only replaces about 25 per cent of a person’s pre-retirement earnings. It needs to be enhanced.

Improving CPP is a simple and straightforward way to ensure Canadians can retire in dignity and out of poverty.

As Mr. Menzies meets by special invitation with those who will support his idea — some employers and the very financial industry that hopes to make a tidy profit from the management fees they can charge — we can expect his conclusion will be that there is huge support for his flawed proposal.


Pension-less Canadians

While 40 per cent of Canadians, mostly because of collective bargaining, have a workplace pension plan, about 11 million working Canadians do not.

Workers with pensions are being told that plans they have paid into for years are now unaffordable.

Ironically it was just a few years ago that many employers were allowed to take, because of pension plan surpluses, contribution holidays.

Where are Canadians to turn? To RRSPs or Mr. Menzies’ glorified RRSP option, called pooled registered pension plans?

A half-century of proof should be enough. These individual saving options are just not working for the vast majority of Canadians. They are not providing security or adequate income replacement. Even bank economists have attested to this fact.

As the attack on workplace pensions continues, one thing is certain the pension crisis will only worsen. Doing more of the same, which is what Mr. Menzies is proposing, will not fix the problem.


CPP wasn’t the whole solution

Dr. Jonathan Kesselman is the Canada research chair in public finance in Simon Fraser University’s school of public policy. He recently completed a study on retirement security in which he endorsed improving the Canada Pension Plan.

He says CPP benefits were set at a modest level on the expectation that workplace pensions and personal savings would grow to supplement public pensions, allowing all Canadians to maintain their accustomed living standards in retirement.

But that has not happened, according to Prof. Kesselman. He says policy makers and finance ministers must resist the pressure from the business lobby and those who oppose CPP improvements. In an article for The Financial Post, he noted that over 30 years ago, efforts to expand CPP were thwarted and warned the ministers not to allow the same thing to happen again. “The time for decisive and bold action is now,” he said.

The labour movement has also been promoting enhancing CPP and all provinces had agreed, with the exception of Alberta. But in order to make this happen, provincial finance ministers will have to get more aggressive with the federal government.

Enhancing CPP makes the most sense if you are truly concerned with the retirement security of Canadians. The only thing standing in the way is a lack of federal political will and ideology.

And as the stock market reminded us last week, you just can’t depend on it for security, so why pretend otherwise?


Lana Payne is president of the Newfoundland and Labrador Federation of Labour. She can be reached by email at

Her column returns Aug. 27.

Organizations: Canadian Federation of Independent Business.Pumping, Simon Fraser University, Financial Post Newfoundland and Labrador Federation of Labour

Geographic location: Canada, Alberta

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Recent comments

  • terry
    August 25, 2011 - 14:11

    we need a combo of the cpp plus a floating contribution plan where an employee and a employer will be forced to pay a small amt (like a cpp) that can float from employer to employer thus the more hours you work the more your pension will be and you dont have to depend on being employed by one employer for a long time to get it.This would be managed at a very low management fee.

  • John
    August 15, 2011 - 19:39

    Federal government and I'm told anybody else drawing a pension has the same amount as their pension clawed back. We paid into both, we should be allowed to draw both.

    • baieboy
      August 30, 2011 - 14:06

      John, you do draw both. "As per your union contract" your cpp is clawed back from your ps pension.

  • Carl
    August 15, 2011 - 12:59

    As with every issue, Lana Payne thinks the solution lies with more government involvement. (It's hilariously ironic that she accuses anyone else of having ideological views.) I'm perfectly capable of saving for my own retirement. I don't need my employer or the government to take my money and save it for me.

  • Ebona
    August 15, 2011 - 12:27

    Who will pay for it? I'm 21 years old and I believe that if all it takes is a modest increase in CPP contributions to maintain a decent living standard for a significant segment of our population, then lets do it! So long as corporations and the wealthy also pay their fair share, that means stop lowering corporate taxes, introduce an estate tax, forget about income spliting and eliminate subsidies to oil companies. In return, my generation would like seniors to join us in advocating for an aggresive strategy to move towards a clean green economy and a significant reduction in tuition fees. Lets work together!

  • baieboy
    August 13, 2011 - 16:41

    This is what I will get along with everyone else. The fact is a senior Canadian couple who have never worked a day in their lives or saved a penny would qualify for more than $24,000 a year, much of it tax-free and indexed to the cost of living. There's still hope if you haven't saved a penny While financial advisors would be skeptical about a strategy of relying soley on government pensions, Enhancing the CPP sounds great, however Lana has no ideas on who will pay for it. Cannot endorse this idea until I see how it will be funded. Could turn into another public sector pension mess with the taxpayer on the hook for mulit- billions.

    • E Kennedy
      August 14, 2011 - 09:09

      Ditto Baiboy, what a deal, and to think I have been working for 30+ years and only have my own retirement savings to rely on and about $12,000 in Social Security per year when I retire, how can I become a Canadian?

    • Eli
      August 14, 2011 - 10:24

      BAIEBOY..And like Danny Williams salary as premier you'd give your public pension to something else? Not friggin' likely!

    • Eli
      August 14, 2011 - 14:01

      E KENNEDY...No trouble to become a Canadian. Get in a row boat, the more beat up the better, throw the oars overboard when you think you're close enough to any part of Canada, drift ashore and claim Immigrant status. Piece of cake that will become part of the Canadian pie without ever doing a tap of work. Maybe BAIEBOY has the answer to saving when my kind went to work and was "owned" in 1950 by a Water Street merchants bookkeeper's salary of $30.00 a week. Maybe BAIEBOY can offer some solutions to government waste that could fund a decent retirement, god knows we're taxed enough on what we have. Afghanastan or G7 parties perhaps? That's just for openers.

  • cyberclark
    August 13, 2011 - 11:53

    It has been the Conservative dream for half a century or more to move the CPP into private hands. They found this near impossible to do so they doing the next best thing of eroding the CPP by setting up this series of private pension funds around the country. I am certain that once they take hold there will be given unfair advantage to these same funds to help make them viable. This will persist over time until the Conservatives feel they can make a case for the Private Sector being a better deal. Dig in. Canada has elected Conservatives across the map!