Last week ended with the bad news that Canada’s economy not only stalled through the whole First Quarter of this calendar year, it actually shrank — in each of January, February and March, as well as in the previous months of November and August.
Insecurity and uncertainty are real. Middle-class Canadians worry about sluggish incomes, the high cost of living, care-giving, learning and skills, their heavy household debts, diminishing employment prospects for themselves and their kids, and the increasing possibility that the younger generation may not be able to do as well as their parents did.
Most Canadians are also troubled about not having enough to live on when they retire. Will they even be able to retire at all?
Three-quarters of those working in the private sector do not have an employer-sponsored pension plan.
The typical 35-year-old today is able to save only about half of what their parents did at that age.
For those in their 50’s, two-thirds have less than $100,000 set aside to look after themselves. One-third have no retirement savings at all.
All this adds up to a retirement income crisis. And it’s coming at us fast. It warrants serious attention, not just bumper-sticker slogans and other gimmicks from a government that cannot seem to muster the wherewithal to tackle a real problem in a serious way.
Make no mistake, this is not just a crisis in social policy. It’s a major economic problem too. If we fail to come to grips with it, Canadians will pay dearly in years to come with soaring social safety-net costs and sharply reduced consumer spending power.
Since 2006, the Harper government’s approach to retirement security issues has missed the mark.
They “resolved the controversy” about Income Trusts by killing those investment tools altogether — thus shrinking the savings accounts of about two million Canadians by some $25-billion. They are postponing the eligibility age for Old Age Security and the Guaranteed Income Supplement. That will slash the retirement incomes of the most vulnerable low-income seniors by $32,000.
The Conservatives are counting on a plethora of voluntary savings options to ride to the rescue. But most of them are designed as tax avoidance tools for “high wealth households” and none of them have made an appreciable difference in easing the retirement insecurity crisis.
Most seriously, Stephen Harper has blocked each and every effort to work with provincial government partners on a comprehensive expansion of the Canada Pension Plan (CPP). Indeed, he has long argued for the complete elimination of the plan.
The CPP is marking its 50th anniversary this year. Its creation was a great achievement for Lester Pearson’s government in 1965. But with changing demographics, by the 1990’s many people were questioning whether it could survive. Then-Finance Minister Paul Martin mustered the federal-provincial consensus and will-power to make the necessary changes (including CPP premium increases) to save and bolster the plan. It’s now actuarially sound and secure for at least the next 75 years.
Premiums paid into the CPP are not a tax. They don’t go into government coffers. They’re an independently managed investment in long term personal security. And here’s another key point — all through that period when CPP premiums were last increased, private sector job creation remained robust. There was no discernible negative effect.
The CPP is a defined-benefit pension plan. With strong management and an exceptional return-on-investment, it ranks with the best in the world. But its benefits are still too low. At maximum it pays out only about $1,000 a month. The average CPP monthly benefit is just under $640. That’s simply not enough.
The Government of Canada needs to respond on an urgent basis to the expressed will of provincial governments to find the best possible ways to upgrade the CPP in a comprehensive manner for all Canadians.
With a retirement income crisis at hand, Canadians expect their governments to work constructively together on real solutions.
By Ralph Goodale’s
Member of Parliament for Wascana