Canada needs an affordable, accessible Universal Pension Plan

There’s nothing like a recession to sharpen the focus on our finances. Canadians watched their savings evaporate in the recent market turmoil, but until retired autoworkers started clamouring for government to bail out their pension funds, most of us remained blissfully unaware of how unprepared we will be when the work stops.

Did you know that the 2009 maximum Canada Pension Plan benefit is $10,905? That’s per year. Old Age Security kicks in another $6,203.52 for a total of $17,108.52. Without a workplace pension plan or significant RRSPs, that’s what you’ll be living on in your “golden” years.

With heavyweights like Toronto Dominion chief economist Don Drummond and the CPP Investment Board’s David Denison telling us that Canadians should be forced to save more for their own retirement, the first part of our advocacy mandate is covered.

We agree there is a problem. Now, what are the solutions?

We would all like to have what most of the civil service has, an indexed pension of around 60 or 70 per cent of pre-retirement income – what experts say we need to live on. This applies equally to members of parliament. All jurisdictions have something similar – taxpayer-funded employer contributions being the most important similarity. And unlike private sector plans, which leave the pensioners out in the cold when bankrupt employers cannot meet deficiency payments, every level of government has [our] taxdollars to fund the deficiencies in the public plans.

So, to put not too fine a point on it, we provide a retirement security for our public servants that is magnitudes richer than what we can afford for ourselves.

That is why CARP advocates for a Universal Pension Plan, modelled on the CPP architecture, that is affordable, broadly accessible, provides a pension adequate to live on and robust enough to withstand demographic and market challenges like those we have been experiencing.

There is a growing recognition of the need for a new broadly based retirement savings vehicle. But that is where the consensus largely ends. There are competing visions of what level of coverage is necessary, whether it must be mandatory, how big it should be and who should manage it.

Nevertheless, the idea of a universal pension has enough traction that it has provoked some very highly placed voices of dissent. Executives responding to a recent survey agree that the pension system is in crisis and that people working today will not have enough to retire on, but said people should look elsewhere for help – corporations should not be expected to establish more pension plans and they don’t think government should either. Instead of government getting involved in the pension business, they said, people should be educated about setting up their own retirement plans.

With what money? You might well ask. And with management fees significantly higher than those paid by the big pension funds, how do you match their returns?

you match their returns? It’s fine for CEOs sitting on their seven-figure salaries to tell the rest of us that we should be saving more for our retirement but that we’re on our own. Luckily, the provincial governments are not so cavalier about our financial future. The western provinces are working on a regional voluntary plan. Quebec is mooting increased mandatory and voluntary QPP contributions. The Atlantic provinces have done the reviews. Only the federal government has punted the issue to yet another research panel.