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Published: April 29th 2011
CLC President Ken Georgetti
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In an Opinion Editorial sent to several newspapers, CLC President Ken Georgetti says that the Conservative government has betrayed Canadians by backing away from promises to expand the Canada and Quebec Pension Plans. He criticizes the Conservatives for switching their position to favour privately delivered pension options whose high management fees would eat up much of the money that workers invest in those pensions.

The Conservative government has betrayed Canadians by backing away from expanding the Canada and Quebec Pension Plans, which would have made saving for a secure retirement easier for today’s workers and future generations. At a meeting with his provincial and territorial counterparts in June 2010, Finance Minister Jim Flaherty was all for improving CPP benefits on a fully funded, go forward basis. By December, he had shifted his ground and stated that he preferred to hand over to the financial services industry yet another piece of the pension pie in a proposal called Pooled Registered Pension Plans (PRPPs). But he still promised to at least keep CPP reform on the table. Mr. Flaherty’s March 2011 budget contained only a passing mention to working on options for an expanded CPP. Even that tepid reference to the CPP was removed when the Conservatives released their election platform on April 8. They say they will work with provinces to create PRPPs but improving the CPP, it seems, is no longer a priority.

How did this happen and why does it matter? It matters because we are facing a crisis in retirement security. Declining workplace pension coverage and low levels of private savings mean that our system is falling short when it comes to maintaining living standards in retirement. Today, 1.6 million Canadian seniors live in poverty, with incomes below $16,000 a year. The situation promises to get worse in the future because many young workers are not able to save enough for their retirement.

For that reason, the Canadian Labour Congress has been advocating on behalf of all Canadians to improve public pensions. The CLC has proposed a gradual and fully-costed doubling of future CPP benefits so that the plan replaces 50 per cent instead of the current 25 per cent of earnings. These improvements would be funded by a modest, phased-in increase in CPP contributions paid for equally by workers and their employers. That would raise the basic pension floor for all workers from the current level of $11,500 a year to a far more livable $23,000. This plan has been costed by a former chief actuary for the Canada Pension Plan, and it is achievable.

The CLC campaigned hard along with retirees’ and citizens’ groups to promote this much needed reform. A majority of provincial and territorial finance ministers agreed with us, although the Alberta government was staunchly opposed. Mayors and city councillors meeting at the Federation of Canadian Municipalities' annual meeting in May 2010 also called for improvements to the CPP. An October 2010 Environics poll showed that 78% of respondents supported increasing CPP benefits.

So what happened? The banks and life insurance companies hate the idea of a better CPP because they profit handsomely by offering retirement investment plans that carry some of the highest management fees in the world. We believe that these corporations got to Jim Flaherty and Prime Minister Harper and they buckled. We made a request for documents under the Access to Information Act. Although much of the information we sought was withheld or heavily censored, it is clear that industry representatives lobbied the Finance Minister. For example, the Great West Life Assurance Company complained in a letter to the minister that background documents prepared by his department last December drew too much attention to the fees charged by actively managed mutual funds. The government department obligingly removed the offending language.

The most effective, low-cost way to provide adequate retirement income for all Canadians is to expand the existing CPP. If we fail to act, inadequate pensions will cost taxpayers a lot of money down the road. We will have to keep raising the guaranteed income supplement (GIS), paid to low income seniors. Projections indicate that the cost of providing GIS will rise from $9.2 billion in 2011 to $22.2 billion in 2030. That will represent an important and growing burden on public finances. Tinkering with the GIS is not the answer. The money raised to provide decent incomes for retired people should come from the workplace. An improved CPP won’t cost the government a penny because the CPP is paid for by workers and their employers. That is the only way to provide pensions which are defined, indexed and secure. No senior citizen in Canada should be poor.

The Conservatives have backed away from improvements to the Canada and Quebec Pension plans. In doing so, they failed to support an option that the other political parties, local governments, a majority of finance ministers, and credible researchers all agree is the best way to go.



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