CARP in the News: Fixing the Pension System and CARP's comments on the Federal Budget


Please find below Susan Eng’s blog post for The Huffington Post Canada on fixing Canada’s pension system, followed by a Toronto Star article including CARP’s comments on the recent federal budget announcement (in bold). 

By Susan Eng, VP of CARP Advocacy

The key challenge facing the Ontario Advisory Panel on Retirement Income Security is to determine how best to help middle income earners save more for their own retirement. No option is off the table. And no option is the front runner.

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; just 5 per cent of the available tax deferral room is being used, most of it by higher income earners.

Many people retired today have workplace pensions, some of which replace as much as 70 percent of their pre-retirement income. Today, two-thirds of the Canadian workforce has no access to a workplace pension.

Early in their career, many of those now retired with decent pensions would have bristled at having as much as 9 per cent of their salary deducted from their pay cheques even if it was matched by employer contributions. I doubt any of them is complaining now. But if it had been up to them, they would probably not have saved.

When we poll our members, they tell us consistently that their children and grandchildren are not saving enough. And they draw from their own experience to advise that any proposed plan must be mandatory. They dont need to see the research that shows if people are required to be enrolled, 85 percent stay enrolled even with the option to opt out.

Our members also know what it takes to get by in retirement and that means monthly cheques that are enough to pay for essentials and a bit of comfort, not just whats left over after the stock market is done with their savings.

Between these two end points, the pension experts have to weigh in to design the appropriate vehicle.

Many say that increasing the CPP is the answer. And it could have been if the federal finance minister hadnt vetoed a CPP increase at the December meeting with his provincial counterparts leaving them pushing a rope.

Instead, the federal government insists on its PRPPs which are not up to the task of materially increasing savings rates nor providing an adequate pension. The provinces about to pass enabling legislation are hardly crowing about it. They dont think they have a choice.

Ontario thinks differently. It proposes to set up its own pension plan and is probably the only province with the population to do so. The other provinces could pass parallel legislation and make it reciprocal so that the pensions would be portable. They need to talk.

Remember, only a modest enhancement of the CPP was ever in play even if the federal government kept its own 2010 promise. A supplementary pension plan was always necessary.

So the choices are: rely on PRPPs, wait for the Conservative government to change its mind and increase CPP not only by 10 per cent as promised but double it as the NDP have demanded, bank on the federal Liberals to form government and add a voluntary layer to the CPP ; something they promised in 2011 but have not mentioned since, or get started on a viable solution that todays retirees can see in their lifetime, not for themselves but to secure the retirement future for the next generation. Im with them.

OTTAWA;Finance Minister Jim Flaherty pledged relief for consumers, hit smokers with higher taxes and predicted a long-awaited budget surplus in an economic blueprint that was long on promises and short on immediate help for Canadians.

In a grab bag budget with a little something to catch the eye of almost everyone, Flaherty doled out limited new funding for job training, university researchers, auto industry projects, Parks Canada renovations and dozens of other initiatives.

Some people will say this budget is boring. I consider that a compliment, Flaherty told reporters Tuesday.

As expected, he pledged to introduce legislation to address consumers complaints about paying higher prices in Canada for products that are cheaper in the United States and suggested that Canadians were being targeted because they are relatively affluent.
The budget said Ottawas competition watchdog would be ordered to put an end to the price gap but there was no plan as to how this would be done or when.

As part of what he called a Consumers First agenda, Flaherty also said the government would look at payday loan practices, credit card merchant fees and the need for more no-cost basic bank accounts.

After years of running budget deficits, Prime Minister Stephen Harper has been steadily reining in Ottawas spending.

This budget defers more than $3 billion in military spending on capital projects, hikes tobacco taxes to rake in more revenue, puts the squeeze on retired civil servants by hiking benefit premiums and freezes the operating expenses of departments. This comes on top of $14 billion in previously announced spending cuts, according to the Canadian Centre for Policy Alternatives.

Canadians can expect to see more and deeper cuts to services and a sluggish economy as a result, David Macdonald, the centres senior economist, said in a statement.

Flaherty, who says the savings are being accomplished through greater government efficiency, forecast a small $2.9-billion deficit in 2014. But if his $3-billion rainy day fund is counted, the government actually ekes out a slim surplus. But Flaherty wants the books back in the black in a big way in 2015 in time for the election so the government is keeping the pressure on to reduce spending.

This years budget is about next years budget, NDP Leader Thomas Mulcair said. That couldnt be clearer . . . this is all about lining themselves up for the 2015 election.

The budget surplus in 2015 is expected to hit $6.4 billion.

Flaherty told the Commons that Canadas had surpassed other advanced industrial countries in job-creation in recent years but acknowledged there are still too many Canadians looking for work, and too many employers looking for workers.

To deal with this employment mismatch, Flaherty last year proposed the $300-million-annually Canada Job Grant program, under which Ottawa, the provinces and business would contribute equally to skills training. But implementation of the program ; originally set for April 1, 2014 ; has bogged down in an intense fight with Ontario and some other provinces over the money will be spent.

Tuesdays budget said the Conservatives will stick to the April 1 implementation deadline and, in provinces where no agreement can be reached, the federal government will deliver the program directly by itself. Government officials were unable to say how much, if any, federal funding a province that opts out of the Canada Job Grant program would lose if Ottawa proceeds on its own.

With 1.3 million Canadians out of work, the budget continued the governments focus on jobs and skills training. Ottawa will devote more than $500 million a year to skills training and advanced research programs ; both intended to boost the economy. But a popular $200-million annual hiring credit for small business was scrapped.

The budget included a $12-million-a-year Canada Apprentice Loan program to help apprentices pay for training, $10 million a year to help entrepreneurs boost new companies and $500 million over two years in repayable loans for new vehicle technology.

Universities will receive $150 million annually for research that boosts the economy, Ottawa will spend $25 million a year to help older workers in high unemployment areas find jobs, and the government will forgo $7 million a year in revenues so that students applying for Canada Student Loans wont be denied funding if they own a car.

Business groups praised the budget but the opposition said the Conservatives economic programs were far too modest to spark growth and reduce the current 7 per cent unemployment rate.

This government has run out of ideas and is demonstrating it once again, Liberal Leader Justin Trudeau commented. Its the same promises that were in the speech from the throne without any concrete measures.

The $279.2 billion budget contained no major tax breaks. Harper has tied tax cuts to balancing Ottawas books, so the Conservatives can be expected to produce a big-bang budget next year.

Canadian Taxpayers Federation director Gregory Thomas welcomed Flahertys fiscal plan but criticized the government for raising Employment Insurance premiums in recent years.

Canadians would rather see more money on their pay cheque than see $20 million frittered away on snowmobile trails and boutique tax credits, Thomas said.

The budget did not include any measures to boost retirement savings through the Canada Pension Plan.

CARP, the seniors group, said its members will be disappointed by lack of action on pension security, pharmacare and caregiver support. Even on specific promises made in the throne speech, there is only a vague commitment to consult, said Susan Eng, CARPs vice-president of advocacy.

Flaherty set aside $11.4 million over four years to support the expansion of vocational training programs for persons with autism spectrum disorder.
Siobhan MacLean 
Media and Communications Coordinator