Over the past year and a half CARP has been calling for a Pension Summit and Comprehensive Pension Reform. The market crisis has affected the lives of so many Canadians we believe it is time to pick up the pieces and fundamentally rebuild our retirement income system. The momentum for pension reform has grown tremendously in the past year and all three Federal parties have put forward reform proposals that would help improve Canada’s Pension system. Unfortunately, all three proposals fall short of providing comprehensive reform that would fix the system for generations to come by providing retirees with adequate retirement income and ensuring pensioners are protected.
On October 22nd the New Democrats unveiled their plans for reform which include a doubling of the Canadian Pension Plan benefits, an increase to the Guaranteed Income Supplement for low-income seniors, a workplace pension insurance fund and facility that could “adopt” orphaned pension funds. To read more about the NDP proposals, please click here.
The backlash against pension reform and against seniors can be seen in a scathing National Post editorial about Jack Layton’s proposed reforms entitled “A Sweet Deal for Grandpa”. To read this editorial, please click here
The editorial advances the position that Mr. Layton’s reforms siphon public funds exclusively to seniors. The Post’s criticism of the NDP proposals is twofold: a doubling of the benefit would present a significant cost for younger people while instantly giving current retirees access to more benefits than they have paid for and that his proposed entitlement increase would indiscriminately increase payments to those over 65 regardless of income.
There are aspects of the NDP’s proposed reforms that could be criticized but the Post’s condemnation could not be more misplaced. The New Democrats are not proposing to double CPP benefits overnight – they are to be phased in to ensure that intergenerational equity is not violated. Secondly, the Guaranteed Income Supplement is the entitlement they propose increasing and it is means-tested. It is a supplement to the Old Age Security Program designed to support low-income seniors. Any incremental GIS payment would also be subject to income testing.
What the NDP proposals lack is a system to enforce accountability and responsibility on companies so that their pensions are not underfunded or orphaned in the first place. The public should not be forced to pay for corporate irresponsibility.
Meanwhile, on October 28th the Federal Finance Minister has released a series of recommendations that would better protect pension plan members by, among other things, requiring higher solvency position before allowing contribution holidays. They have also recommended benefit improvements encouraging more stable funding by increasing pension surplus threshold from 10% to 25% – this will also apply to provincial plans because change is to the Income Tax Act requiring employers to fully fund benefits on termination –there are no rules now but this is a catch up to what provinces already stipulate. To read CARP’s press release on the recommendations, please click here.