Younger Canadians Will Suffer the Most From This Failing System

CARP’s VP of Advocacy, Susan Eng, recently had another opportunity to write a blog for the Huffington Post. Following Susan Eng’s November 22nd article on Why CPP Matters, this November 28th post links the OECD report detailing the rise in Canada’s senior poverty levels to the urgent need to enhance CPP to meet future generations’ retirement needs.

Younger Canadians Will Suffer the Most From This Failing System

By Susan Eng, VP of Advocacy for CARP

Canadian seniors are at risk of poverty in old age if we don’t fix our pension system. But it’s the younger generation, not current retirees who are most at risk. But don’t take it from me — the OECD is weighing in too.

Canadian politicians unwilling to acknowledge that we have a retirement savings problem like to trot out dated OECD figures saying that “only” 5.4 per cent of Canadian seniors live in poverty. Well, now that figure is 7.2 per cent.

Statscan says there are now 5.4 million seniors — so that means 388,000 Canadian seniors live in poverty today. The only way to make that sound good is to compare it to the OECD average of 12.8 per cent.

What this OECD report tells us is that old-age poverty in Canada increased 2 percentage points from 2007-2010, whereas it fell in 20 other OECD countries. Old age poverty increased the most among women, particularly those who are single. The reasons are fairly obvious – the report notes lower wages, more part time work and career gaps and not being able to save enough during their careers. For older women, improved longevity is a problem.

The OECD report targets Canada’s pension system, both public and private, as the culprit- replacing only about 45% of average pre-retirement gross income, well below the two-thirds that many experts recommend for an adequate retirement. Even our much vaunted old age security (OAS) and guaranteed income supplements (GIS) pale in comparison — public (government) transfers to seniors in Canada account for less than 39 per cent of the gross income of Canadian seniors, compared with the OECD average of 59 per cent.

The solutions are to either improve government transfers or to improve access to viable retirement savings vehicles.

So what has Canada done? The opposite. In the name of more sustainable government budgets, the eligibility age for OAS has been raised from 65 to 67 leaving those who cannot hang on for the extra two years without a safety net.

This article was published by The Huffington Post on November 28th,  2013.  To see this article and other related articles on their website, click here. 

After acknowledging in 2010 that Canadians had a “savings gap”, our government has put in place a voluntary savings scheme which will sit atop the rest of the voluntary schemes like RRSPs that only small percentage of Canadians are using. The rest of us are still waiting for a better option — like increasing the CPP which was promised in June 2010 but abandoned by December of the same year.

What is worse is that the security of our workplace pension system is being eroded. Even in the civil service, the younger generation will have much more restricted access to workplace pensions that have a guaranteed payout and those that exist are being pared down with newer employees obliged to make higher contributions for lesser benefits.

The backstop for these younger employees is an immediate improvement to the CPP which can only benefit them, not today’s seniors. But the change has to take place now since it takes a full working career for a pension improvement to be available.

The federal government may yet reverse course and agree with the provinces to change the CPP this December. If not, it could be an election issue in 2015.

The only thing more sobering than a report card telling us that our pension system is failing to prevent poverty in old age is the realization that our government refuses to do anything about it.

© The Huffington Post