Lester Pearson was a remarkable Canadian. We first came to know him as a proficient global statesman, skilled in the diplomacy of multilateralism. He assisted at the birth of the United Nations, invented the concept of peace-keeping, and won the Nobel Peace Prize. In 1963, he became Prime Minister of Canada.
Five years in that job, Mr. Pearson never once had a majority in Parliament, but still he led one of the most productive governments in Canadian history.
This past February, we celebrated the 50th anniversary of Canada's Red Maple Leaf Flag -- one of Mr. Pearson's proudest accomplishments. Next year, we'll mark the 50th anniversary of national medicare, another Pearsonian legacy.
And this week, the legislation that originally created the Canada Pension Plan (CPP) will turn 50 years old. It passed the House of Commons on March 29, 1965, was approved in the Senate on April 1 and received Royal Assent on April 3. The CPP and its Quebec counterpart came into effect on January 1, 1966.
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.
Established by federal-provincial agreement, the CPP is a mandatory contributory plan into which all employees and employers pay regular premiums. That money is invested to generate the returns necessary to cover the plan's benefits. As such, CPP contributions are essential long-term investments in portable retirement incomes for a large portion of Canadians, supporting their future living standards.
That sounds like common sense today, but 50 years ago it took extraordinary vision, diplomacy, negotiation and persistence to get it done. National Health and Welfare Minister, Judy LaMarsh, was a dynamo at the centre of the action. Quebec Premier Jean Lesage was pivotal, along with Ontario's John Robarts. Stanley Knowles and Paul Martin Sr. were constant Parliamentary advocates. And Lester Pearson provided the driving determination.
The CPP was an historic accomplishment!
But by the 1990s -- with longer life expectancies, aging demographics and escalating unfunded liabilities -- doubts had arisen about the future soundness of the Canada Pension Plan. Would it run out of money? Was the investment strategy getting adequate returns? Were the benefits supportable? Was the administration strong, efficient and independent? The plan clearly required major renovations to save it, and that would take federal-provincial consensus, which is always hard to get.
As part of a multi-pronged effort to restore fiscal integrity to the Government of Canada, then-federal Finance Minister Paul Martin Jr. decided to tackle the CPP challenge. He found a key ally in the Provincial Treasurer of Alberta, Jim Dinning. Ontario Finance Minister Ernie Eves was also helpful. Together, they built the business case, the social consensus and the national momentum to rejuvenate the CPP.
It's an interesting historical footnote that saving the plan earned strong support across Canada -- except for provincial NDP governments in British Columbia and Saskatchewan, and Stephen Harper and his Reform (now Conservative) Party.
Today, the CPP ranks as one of only a handful of successful public pension plans worldwide. Its administration is competent and cost-effective. It's a distinct fund, independently managed according to investment policies that are free from political interference. It has a proven track-record as an international leader in the pension industry, generating world-class rates of return. External actuaries have recently judged the CPP to be sound and secure for another 75 years (the maximum actuaries will go).
Because it's been neglected for the past nine years, the CPP is labouring under one major limitation. The maximum regular benefit a contributor can receive is just over $12,000 per year. The average is just more than half that. Those amounts are far from sufficient to ensure retirees can maintain their quality of life, without other significant savings.
But the typical 35-year-old today is saving less than half of what their parents did at that age. Three-quarters of those working in the private sector don't have access to an employer-sponsored pension plan. And of those who are within 10 years of retirement, fewer than one-third have $100,000 or more set aside to sustain themselves. Another third have no retirement savings at all.
While they have tinkered with various private sector pension adjustments, the Harper government has not been helpful in dealing with basic retirement income insecurity.
They eliminated previous investment tools like Income Trusts, destroying about $25-billion in value formerly in the savings accounts of some two-million Canadians. They are delaying eligibility for Old Age Security and the Guaranteed Income Supplement by two years, which will take nearly $30,000 from the lowest-income and most vulnerable seniors -- most often women living alone. And Mr. Harper has vetoed every suggestion to upgrade the CPP.
All of which is to say: 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.
ALSO ON HUFFPOST:
Here is a look at OAS and the CPP and how they differ. (Getty) With files from CBC
The Old Age Security pension is a monthly payment available to Canadians aged 65 and older who apply and meet certain requirements. Unlike CPP, it is not dependent on a person's employment history and a person does not need to be retired from a job to qualify. The government adjusts the OAS payment every three months to account for increases in the cost of living according to the Consumer Price Index. The average monthly amount was $508.35 in the last quarter of 2011. The maximum payout for the first quarter of 2012 is $540.12. There are also supplementary programs, including the Guaranteed Income Supplement, which provide additional income to low-income seniors. The government claws back OAS payments from high-income Canadians. In 2011, for example, if you were retired but had an income of more than $67,668 (from things like pensions and personal investments), the government would reclaim part of your OAS payment - 15 cents for every dollar of income that you had above the $67,668 threshold. That means that if you were retired with an annual income of around $110,000 or more in 2011, your OAS payout would be reduced to zero. (alamy)
OAS is available to Canadian citizens and legal residents living in the country who have spent at least 10 years in Canada after they turned 18. It is also open to people outside of the country who were Canadian citizens or legal residents on the day they left the country, as long as they spent at least 20 years of their adult life in Canada. (Getty)
A person should apply for OAS six months before they turn 65. If you have not lived in Canada continuously or were not born in Canada, the government requires a statement containing all the dates when you entered and left the country. It may also ask for supporting documentation. If a person applies after age 65, they can receive up to 11 months in retroactive payments along with a payout for the month in which a person applies to receive OAS. So if a person applied after their 66th birthday, they would receive 12 months of OAS payments. (Flickr:Keith Williamson)
In order to qualify for a full pension, a person must have lived in Canada for at least 40 years after turning 18. People also qualify if they reached the age of 25 on or before July 1, 1977, and either lived in Canada, had some residency in the country after age 18, or held a valid Canadian immigration visa and spent the 10 years immediately before appying in Canada. For those who do not qualify for a full pension, a partial amount is paid out based on the number of years spent living in Canada. For instance, if a person has spent 36 years of their adult life in the country, they will earn 36/40th of the full OAS amount. Based on the eligibilty requirements, the minimum payout is one-quarter of the total, to account for a total of 10 years spent in Canada. Once a partial pension has been approved, the percentage of the total OAS pension received will never increase even if a person spends more years in Canada. (Matt Cardy/Getty Images)
The Canada Pension Plan is a form of retirement income that is open to all Canadians who have worked and paid into the system through deductions from their paycheques. The amount a person receives under the system depends on how much and for how long a person contributed, along with the age at which a person started receiving CPP payments. There are three types of CPP benefits: disability benefits, retirement pension and survivor benefits. For the purposes of clarity, this article focuses on retirement pension form of CPP. The average monthly CPP benefit in 2011 was $512.64. The maximum payment in 2012 is $987.67. The government adjusts the CPP rate every January to account for changes in cost of living as measured by the Consumer Price Index. According to Service Canada, "If you have lived and worked in Canada most years between age 18 and 65 and earned about the average Canadian wage ($39,100 in 2002), at age 65 you would receive a CPP retirement pension of about $788 a month." (Getty)
Anyone who has made a payment to CPP is eligible for full retirement pension benefits once they reach the age of 65. A person can begin receiving CPP anytime after age 60 if they stop working or reduce their income, although they incur a financial penalty by doing so. In 2012, a person receiving CPP early will be subject to a 0.52 per cent reduction for each month before the age of 65 that they received payments. That number is slated to rise to 0.6 per cent each month in 2016. On the other hand, if a person chooses to delay CPP payments they receive a similar increase for each month they wait between the age of 65 and 70. In 2012, that increase works out to 0.64 per cent per month and will rise to 0.7 per cent next year. (alamy)
This is really up to the individual and whether they want to receive a smaller or larger CPP benefit. However, the government recommends applying six months before a person wants their pension to begin. Canadians can apply online or print out an application and deliver it to a Service Canada location. Similar to OAS, a person can receive retroactive payments covering up to 12 months if they delay applying for CPP until after their 71st birthday. (alamy)
A person contributes 4.95 per cent of of their total pensionable income -- set at a maximum of $50,100 in 2012 -- to a total of $2,306.70 in contributions per year. Their employer contributes an equivalent amount. Self-employed people, on the other hand, must contribute both portions. Anyone earning less than $3,500 is automatically exempt from CPP contributions. At age 70, a person stops contributing to CPP even if they continue working. (alamy)
Follow Ralph Goodale on Twitter: www.twitter.com/@RalphGoodale