The following letter, written by CUPE National President Paul Moist, is a response to a report from the Fraser Institute released on June 25 called “RRSPs and an expanded Canada Pension Plan”. Also read the Globe and Mail article entitled “Expanding CPP to boost retirement incomes could trigger less saving: report”.
The Fraser Institute report on the Canada Pension Plan overlooks one critical fact: virtually all Canadian workers contribute to CPP, yet fewer than one in four tax filers contribute to RRSPs.
The study acknowledges that RRSP’s are mainly used by high income Canadians. It is not high income Canadians that are facing retirement insecurity – it is middle income and low-income workers who are unable to save adequately for retirement. Expanding the CPP is the best way to meet the retirement needs of all Canadians.
The most telling piece of the report is that the Fraser Institute does not go so far as to say expanding CPP is a bad thing, and even hints that there “may be benefits to a compulsory expansion of CPP”.
There are many benefits to expanding the CPP that outweigh the costs. Canadians often pay very high mutual fund fees within their RRSPs while the CPP has very low management fees, ensuring more of the contributions are used to actually fund retirement.
CPP also provides a secure, defined benefit, which is critical for long term financial planning– RRSPs typically do not. Also, funds held in RRSP are commonly withdrawn and consumed before retirement age whereas CPP is locked in until retirement.
Even with an expanded CPP, voluntary saving vehicles like RRSP’s will continue to be accessible only for high earners who save more money than low- and middle-income earners.
A gradual and modest expansion of the Canada Pension Plan is the best way to ensure retirement security for each and every Canadian.
Canadian Union of Public Employees