This week, the legislation that originally created the Canada Pension Plan (CPP) will turn 50 years old. The stated purpose of the Canada Pension Plan was to ensure all working Canadians have an opportunity to retire in dignity. It builds on basic Old Age Security to achieve greater social justice linked to progress in the economy. But Canada has big challenges to face in the immediate future if we're to honour Lester Pearson's ambition of a fair, efficient, adequate system of retirement income for all Canadians.
Nine-million baby boomers will retire from the workforce over the next two decades, and when they do, they will start to consume the most expensive forms of government programs. This is great news for seniors, but terrible news for our public finances and for young Canadians forced to foot the bill. Generation Y has been dubbed the "Millennial" generation because we came of age at the turn of the new millennium. A more fitting name for this cohort is Generation Screwed.
In a speech in Toronto a couple of weeks ago, Kevin Sorensen, Minister of State for Finance, introduced details of a new "hybrid" pension plan proposed for all federal workers and other corporations under federal pension regulation. He referred to these proposed plans as Target Benefit Pension Plans.
Now, in Australia, you get a lump sum pay-out (hardly any Aussies annuitize their lump sum). Once again, you have to manage your retirement on your own. Now, even if you knew exactly when you were going to die, this would be difficult, but when you have no idea of your personal life expectancy, this is a problem beyond the capabilities of the average Canadian.
Any solution must address the chronic under-saving that threatens to reduce the standard of living for a significant percentage of people earning from $30,000 to $100,000 once the pay cheques stop -- whether by choice or not. The people who should be using existing savings vehicles like RRSPs are not.
Worried about retirement savings? Premier Wynne is certainly worried for you. She doesn't think that families in Ontario are saving enough for their retirement. Considering how much we are nickel-and-dimed in this country, maybe she's right. The further the government reaches into our pockets, the less we have to put away for the future.
According to our monthly Business Barometer survey, B.C. small business confidence grew substantially this year. In February, B.C. ranked in sixth place among Canada's 10 provinces -- but by the end of November, we were sitting solidly in second place. With the New Year almost upon us, it is worthwhile to take a moment to reflect upon 2013's high and low points for small business.
A recent Sun Life survey has provided some sobering food for thought ahead of a holiday season that often means less sober endeavours for many. It seems that at year end, the majority of Canadians are no better off financially than they were a year ago and that situation worsens for those 55 years of age and older.
The employer groups that vehemently oppose CPP hikes mostly don't offer any pension support for their employees. And their arguments are increasingly hysterical. They are still calling any CPP increase a "job killer" and managed to convince the junior minister of Finance to parrot their talking points.
The upcoming meeting of federal and provincial finance ministers will touch on what's become a politically charged debate about expanding the Canada Pension Plan. Proponents have tried to convince Canadians they are not saving sufficiently for retirement with some even suggesting we are on the brink of a retirement crisis. These views simply do not reconcile with the available empirical evidence.
Canadians are not using RRSPs enough, and those that do are in the higher income brackets. The people who need help saving for retirement are those earning under $100,000 -- i.e. most Canadians. So the goal is to ensure that any change has broad effect and target the reasons why people are not saving.
As our political leaders deliberate expanding the CPP, they would do well to consider the evidence which does not support the notion of a broad retirement income crisis. They also need to consider that a compulsory expansion to CPP could reduce private savings and the flexibility they afford Canadians.