Opponents to expanding the Canada Pension Plan are preparing for their last stand. They are pulling out all the stops – and all the tired arguments – against finally addressing this countries pension crisis.
With vocal leadership from Prince Edward Island, and a renewed push from Ontario, provincial and territorial finance ministers are now pushing harder than ever for the Harper Conservative government to move forward on expanding CPP benefits. In a statement following their meeting in late October, the provincial and territorial finance ministers gave a clear message to their federal counterpart Jim Flaherty – the CPP needs improvements.
Real reforms to our public pensions have never been closer. Only a handful of surmountable hurdles remain, but to finally make it over the top we are missing one key element. We need the federal government to show some leadership and make CPP expansion a reality.
But in this crucial homestretch, opponents to expanding the CPP – the most efficient, effective and affordable plan to addressing retirement income insecurity - are still persistent in pushing their pension myths.
There is not a shred of credible empirical evidence to support assertions that CPP contributions amount to a payroll tax and a job killer. CPP contributions, like all contributions to any pension plan, are deferred wages. Calling an employer’s pension contribution a payroll tax is disingenuous, if not an outright deception.
Further, claims that increases to CPP contribution rates would cause Canadians to save less through private retirement savings plans is a fundamentally flawed argument. It is true, less than 25 per cent of Canadians contribute to RSPs, mainly because they can’t afford to. RSPs have proven to be an ineffective way to prepare for retirement. It is curious that groups claiming to be concerned with Canadian workers’ ability to contribute to RSPs aren’t advocating to increases to the real wages of workers – which have been stagnant for decades. Many of the flaws with RSPs are repeated in the federal governments private pooled savings plan. Experts across the country agree voluntary savings vehicles, like RSPs and the private pooled savings scheme, are a non-solution for the vast majority of Canadians without a workplace pension.
Delaying CPP expansion to keep propping up the failed experiment in voluntary private savings does nothing to solve the pension crisis.
And there is no denying this is a crisis. Today, over 11-million Canadians are without a workplace pension plan. Nearly half of Canadians born in the 1960’s will end up with a retirement income below 80 per cent of what they earned while working, according to a recent report from the CIBC. Six in ten of Canadians born between 1985 and 1989 will have the same fate. In contrast, only a quarter of Canadians born during or shortly after World War II faced a similar income drop after retiring.
Canada has the highest private investment fees in the developed world, on average five times those of the CPP costs. Canada’s CPP system is well run, fully portable and fully paid for by employees and employers. The CPP is funded sufficiently for the next 70 years.
We need to build on the success of the CPP.
This is why the Canadian labour movement has been advocating for an expansion. By slowly increasing contribution rates by 2.85 per cent over seven years, Canadians could receive 50 per cent of their pre-retirement income in CPP benefits, rather than the current insufficient 25 per cent. At a very low cost to themselves and governments, Canadians could get meaningful pension reform.
After years of work by the labour movement and our allies, the provinces and territories are coming around to seeing the vast merits of improving CPP. Canadians see it too with almost 75 per cent supporting an expanded CPP.
It is now time for the federal government to quit the delays, show the leadership we need, and expand the CPP. We can and must do better for the 11 million Canadians without a workplace pension and for generations to come.