This is a recent piece written by CUPE President Paul Moist on BC’s new pension legislation.
Much has been said lately about the sustainability of pension plans; particularly defined benefit pensions. Challenges include demographics (as the baby boomer cohort hits retirement age), low interest rates, and the market crash of 2008. That is why this week’s BC Pension Forum bringing together investment sector, labour, and pension managers was so very important.
Organized jointly by the BC Federation of Labour and the Shareholder Association for Research and Education (SHARE), this forum offers space for pension trustees, pension advisory committee members and pension activists with investment managers, public policy makers and leading national and international thought-leaders to discuss key pension plan governance, funding and investment issues.
This is a much needed space. Every Canadian deserves to retire with dignity. But more and more Canadians are facing uncertainty when it comes to their retirement plans.
More than six in 10 Canadian workers are without a workplace pension plan. And Canadians reject private savings schemes such as RRSPs. Less than one-quarter of Canadian taxpayers made an RRSP contribution last year.
Over 40 per cent of Canadians expect to retire later than they planned. Over 55 per cent of Canadians would face financial difficulty if pay was delayed one week. When Canadians are pinched too tight, they have a harder time saving for their retirement.
Increasing retirement security for all Canadians should be a government priority, but the approach introduced by the BC Liberals will do little to address the problem.
The Pooled Registered Pension Plan Act introduced yesterday allows a voluntary system of contributions very much like a group RRSP. These voluntary, defined-contribution style plans will not be effective in solving our pensions crisis because they do not provide the same level of protection for retirees as the CPP or a defined benefit workplace plan. Employers are not required to offer these plans, nor are they required to contribute, or match payments to them. Employees will have no guarantee about how much money will await upon retirement because they are not defined benefit plans.
On just these points it fails any measure in terms of a meaningful response to Canada’s retirement security challenges. They will do much more for the financial industry than they will for Canadian workers.
There is another solution, one that is picking up support from all sectors.
CUPE, along with seniors’ organizations, bankers, labour organizations and provincial governments, supports an expansion of the Canada Pension Plan. Currently, the Canadian Pension Plan (CPP) does not provide adequate income to cover the gaps in pension coverage. On average, the CPP provides a monthly income of only $530. Imagine the economic and social issues ahead as those baby boomers retire into poverty.
The CPP was designed to work with workplace pension plans and private savings to provide retirement security for all workers and economic security for Canada. Many workplace pensions, however, are experiencing pronounced funding challenges. This underscores the importance of a public solution that works for all Canadians - not just the Canadians that can set aside money for RRSPs.
We would like to see a gradual doubling of Canada Pension Plan benefits for all working Canadians. Under this plan, by gradually increasing CPP contribution rates by about three per cent over seven years, Canadians will - over time - receive 50 per cent of their income in CPP benefits, rather than the current insufficient 25 per cent.
For the economic security of all Canadians, the entire retirement security system must be tackled. A modest increase in the CPP is a good place to start. This proposal is already supported by eight out of 10 provinces representing over 80 per cent of the Canadian population. On behalf of 627,000 workers across Canada, CUPE reiterates its call for expansion of the CPP and a federally led national summit, on retirement security for all Canadians.
Paul Moist is the national president of the Canadian Union of Public Employees.