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Ken Georgetti

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This Budget, Old People Be Damned

Posted: 03/31/2012 11:47 am

My grandfather Mike Georgetti worked at a manual job until he could work no more and then, worn out, he retired without a pension. He had four kids and he and my grandmother had to rely on them to support him in his old age.

I was thinking of my grandfather on March 29 when the Conservative government announced in the budget that it will raise the age at which Canadians can receive Old Age Security (OAS) benefits from age 65 to 67.

Many workers are employed in physically demanding or otherwise stressful jobs from which they want and deserve to retire by age 65. Others are unable to work past that age due to illness, disability, or the need to care for a partner. These people want to retire but many are forced to stay in the workforce because they can't afford to leave. In fact, one in four persons aged 65 to 70 remain in the work force today, double the level a decade ago.

The real issue here is not about the age of retirement but rather about income in retirement. About one half of workers with medium level earnings will experience a serious drop in their standard of living when they retire. That is a disturbing prospect. OAS provides only a basic pension income of just over $6,000 per year. It makes no sense to scale back this small but essential element of the retirement income system, as the Prime Minister proposes to do.

Canadians have repeatedly been told that they can rely on a combination of public pensions and their private investments for a secure retirement. But it hasn't worked out that way. Canada's public pensions -- OAS plus the Canada Pension Plan -- provide a combined maximum income in retirement of less than 40 per cent of the average wage. That is one of the lowest earnings replacement rates in any advanced industrial country.

The theory has been that the remaining income gap can be made up by a combination of workplace pension plans and individual savings such as RRSPs. But the system has not delivered as promised. Two thirds of all workers no longer have access to an employer pension plan because employers either won't provide them or have shut them down. As for RRSPs, few people have been able to save enough because returns are low, due mainly to the money eaten up in high financial management fees.

We do have a looming pension crisis in Canada, not because people are retiring too early but because their combined pension and investment income will still see them retiring into poverty. Rather than attacking the OAS, the federal and provincial governments should be working together to improve our public pension system through a gradual expansion of the Canada and Quebec Pension Plans. The CLC, along with retiree and citizens' groups, has been advocating this option for several years now but the federal government has not been listening.

An enhanced CPP/QPP has many advantages. We can double future benefits for today's young workers through a modest, phased-in increase in contributions over a period of time. Pension experts say the CPP is actuarially sound for at least the next 75 years (meaning it is guaranteed to deliver as promised).

These plans are paid for entirely by contributions from workers and their employers rather than from tax revenues. They do not cost governments a cent. It is workers and their employers who ought to be the ones putting aside money now to ensure a decent income in retirement and an enhanced CPP/QPP will allow them to do so in the safest and most effective way. My grandfather would have said amen to that.

Expanding the CPP/QPP would also reduce future costs of the Guaranteed Income supplement, which is paid to low income seniors. We should think hard about the unfairness of the tax bill that today's young workers will face as more and more retirees are forced to draw on taxpayer-funded GIS benefits if we don't act now. In addition, an enhanced CPP/QPP would ease the pressure on provinces to support low income seniors and allow those jurisdictions to fund other hard-pressed social programs.

The federal government should hold off on its unilateral and ill-considered changes to OAS and agree instead to a national summit that would give serious consideration to the important issues of pensions and retirement.

 

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04:00 AM on 04/03/2012
This measure was necessary or the government never would have done it. Having self-serving special interest groups whining at a "national summit" would only cause wild-eyed hysterics among the uninformed. If you don't like it, save more, retire earlier.
georgee2
My Canada Includes Everyone
05:21 PM on 04/02/2012
I fear for my children's future. This is only the start to the demise of all social programs. Employment insurance was gutted by the Liberals and now the Conservatives have reduced the work force to the point where it can take months to get you claim processed. Heath care will be gone in 10-12 years if we leave the conservative changes in place. This is being done so corporations can take all the money. They only have a portion now. This government is the worse in our history.
03:03 PM on 04/02/2012
how on earth can middle income people keep a roof over their heads ,raise and feed a family and find enough to put away for retirement ?????
01:46 PM on 04/02/2012
Will be over 10 yrs before the change takes place, someone else will be in power, but they wont change it (same as Chrentien and the GST). Bottom line, when the OAS was brought in people died at 67, not they die at 87
PS: My sister who has been on welfare for 34 yrs, just turned 65, however she was able to keep her welfare rates and not have to drop to the OAS rate. She gets the equivalent of $45K a year, when you consider her fantastic (almost) free housing
11:19 AM on 04/02/2012
Even though I agree whole heartedly with Georgetti's article there's not a snow ball's chance in hell that it will happen. Harper and his crew are dead set against any union, pension or aid to seniors of any kind. They have used attack ads and lies to pit one group of voters against others to drive a wedge between citizens who used to care about each other. Under Harper a large percentage of voters have become uncaring, heartless and rude just like he is so he will not back down no matter what happens or how much public outcry he hears.
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02:29 PM on 04/01/2012
Not just the old people, people be damned. This is a diseased conservative ideology that is inhumane and demonstrably anti people.

The paradox is WE put these heartless religious nutcases in the office.
01:22 PM on 04/01/2012
Let's not forget -- we live in one of the wealthiest countries on this Planet, and we are proud of it. Yet this pride comes with a price of social responsibility. Samuel Johnson said it best: "A decent provision for the poor is the true test of civilization."
OAS amounts to about $500 a month and is providing much needed basic support to the poorest of our seniors. As citizens of this country, it is our responsibility to fight poverty as its existence should put us all to shame!
12:29 PM on 04/01/2012
Settle down George. First off the Feds said they will work with the provinces to make sure retirees aren't adversely affected. And seriously, people working right now who think they will be seriously in trouble with no OAS from age 65 to 67 can't scrap up a lousy $12,000 to cover the short fall? And how is it people can't afford to save on their own but they can afford increased CPP premiums? And please knock it off with that mutual fund fee rant. There are plenty of low cost alternatives like EFTs and GICs. Listen, my grandfather and father had manual labour jobs too. But they lived within their means, never asked for handouts and had a good life right through retirement. Why can't the people that you represent do that?
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Jack Hope
Occasionally quoted by Mainstream Media
03:55 PM on 04/01/2012
Any with any financial experience will tell you that the easiest way to save money is in small increments steadily increased over time. Which is pretty much what was proposed in the article. You wouldn't increase CPP premiums by 25% in one shot, you'd do it a few percentages points over several years.

As for why people don't do this on their own, there are lots of reasons that don't fit into your simplistic analysis based on two data points. There's a reason why income tax is a payroll deduction after all. Most people couldn't be counted on to put enough aside to pay it once a year.
10:39 AM on 04/02/2012
I have more faith in people than you and George. I'm a financial planner so I'd say I have a heck of a lot more experience dealing with more people and their finances than you or George put together. And I can tell you that contrary to what you believe, most - and I mean the majority of people - are completely able to save. You and George want those people as well as all employers to shoulder the weight of all the inept and lazy folks out there who decided to spend more than they earn. Nothing short of major wealth distribution from those that worked and saved to those that didn't will satisfy people like you and George. By the way "anyone with financial experience" will know intuitively that the CLC's math on increasing CPP woun't fly. Ask them to see their calculations like I have repeatedly and you'll see that the Labour Boss has no clothes.
10:15 AM on 04/01/2012
This Budget, Old People Be Damned, should have read ``This Budget, Old Peopleho do not pay unionsdues, Be Damned!`

...

With the average Canadian earning $46,000 a year, they are faced with a increased tax burden to support the public unions with their wages (25.0% higher then the average Canadian) defined benefits and pensions - ie teacher in Ontario, average wage $94,000, with an average pension of 67,000 a year, to go with their tied to inflation drug and dental bennifits.

These individuals continue to demand that we pay to support their lifestyle - sorry the gravy train is leaving the station.
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CreepyThinMan
More dapper than Don Draper.
12:59 PM on 04/01/2012
Wow, a right wing tirade against unions from a rightwing tool, who would have guessed?!? FYI shortbus, it was the unions that fought to create the wages and benefits that previous generations enjoyed. But now that conservative fascists, like you, who hate the working class have managed to ensure that NO ONE will be able to save for retirement as you've shipped our manufacturing base to slave labor countries such as Mexico, China and India.
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Jack Hope
Occasionally quoted by Mainstream Media
03:41 PM on 04/01/2012
Couldn't have said it better myself.

The race to the bottom mentality is going to leave almost everyone in this country impoverished unless it's stopped.
05:25 PM on 04/02/2012
But a left wing tirade is soooo much more honourable, right?
How do you know he's not a working class person? Or is anyone who disagrees with labour a second class citizen?
He shipped the manufacturing base to other countries? And you've never shopped at Walmart or bought anything made in a foreign country? Sorry, buddy, YOU shipped those jobs overseas.
11:50 PM on 03/31/2012
1:18 AM on March 31, 2012
Harper and his crew are putting the death wish on all things Canadian! Parks, Pensions, OAS, Health Care Bulk Water exports; you name it.

If it appears on the Republican list of things that are hindering their business; Harper and his crew are on it; fast!

They are hooked at the hip with the Republican Parties and the Western Provinces!

http://albertathedetails.blogspot.com/2011/03/conservativerepublican-alliance-pnwer.html

And having little regard for the rest of Canada when one of their own gets in trouble they pulled out the stops when the Oil Companies were challenged for having more Americans (Illegal) on their payroll than Albertans. http://albertathedetails.blogspot.ca/2012/03/new-canada-immigration-plan-in-action.html
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The Canadian
Stop Harper
11:05 PM on 03/31/2012
Harper is hoping that he can make unilateral changes in the age of retirement without a major squawk from the public.

Aside from the fact that this change should have been a central campaign issue because of its far reaching consequences, if there is no public outrage, then Harper will be encouraged to start tearing apart other universal programs, like out healthcare system.

Things that will affect Canadians like this should be open to debate, and not rammed down our throats. There may in fact be a lot of good reasons to change the retirement age, but that's not the point. Almost nobody asked for this change, and it seems very few people welcome it, and yet Harper inflicted on us without any meaningful dialog.

This sort of autocratic behaviour is why it will be a pleasure to vote him out of office in the next election, and then we can fix the damage he is doing to Canada.
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Add In Canadia
Egotism is a weakness
02:17 PM on 03/31/2012
Considering the average life-span of Canadians has gone up like... what 10-15% since pensions were introduced, it makes a bit of sense to increase the age of requirement.

If through the miracle of science we end up pushing the average life span of a person to 130, but the age of retirement doesn't move at all, then I don't see how pensions can possibly function; because you're pretty much suggesting that we support people through half of their lives.

Pensions used to only have to support an individual on average for about 0-10 years. These days it's in the 0-30 range. People are living longer, and more people are hitting the retirement age. Medical technology presses on. When the boomers hit their 80s twenty-thirty years from now, the average life span of Canadians might be hitting 90.

The young workers who are entering the workforce now? Well when they hit retirement age, the average life span of Canadians may very well be 100 at that point. Do you honestly suggest that the retirement age remains at 65 or 67 at this point?

The only way this doesn't pan out is somehow the average life span of Canadians suddenly levels off or even drops; but the only way this happens is if we let our health care system implode.
04:49 PM on 03/31/2012
What about the fact that machines are taking over for producing so many things? The answer of course is make capital gain all the rewards from that and force the larger pool of workers to fight for fewer jobs for lower wages and guarantee poverty for most.  That's the logic of the existing morally bankrupt system.
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12:29 PM on 04/01/2012
Add in Canada:

The idea that people are living longer is simply a myth. In fact, a study was recently released that shows the average life span of women in the US is falling; it is likely the same here in Canada. There have been other studies that show that overall, working people do not live as long as people who have white collar jobs or are wealthy. Really, nothing has changed. This is simply a myth being used to once again justify sticking it to working people while move more and more of the shrinking pie to a small few. Your assertions are baseless. Combined with the fact that it has already been explained that there is no "crisis" in CPP or OAS, this Harper plan should be seen for what it truly is, simply another Righ Wing attempt to stick it to ordinary people one more time.

Its shameful!