It seems most provinces get it when it comes to pension reform; the federal government, on the other hand, appears determined to stick it to future generations of pensioners.
Provincial finance ministers didn’t refrain from showing frustration after meeting with their federal counterpart, Jim Flaherty, on Monday over the issue. With no move to enrich the Canada Pension Plan, or even to study it, the provinces threatened to take matters into their own hands. For the sake of young Canadians, we hope they follow through on those threats.
While Canadians have every reason to be wary of demanding more from a social program, the fact is, since Lester B. Pearson introduced the safety net in 1965, the payouts, though small, can make a big difference in the standard of living for retirees.
For future generations, however, that money won’t just mean a better standard of living, it could prevent a life of poverty.
Currently, the CPP plan pays out about 25 per cent replacement benefits on up to $51,100 of pensionable earnings, resulting in a maximum annual benefit of $12,150.
While the onus should be on young individuals to plan for their retirement years by saving now instead of relying on government, the fact is, today’s youth will be at a disadvantage compared to their baby boomer parents.
No generation has ever had so much disposable income due to cheaper housing, higher wages and plentiful jobs as the boomers. Because of this, Canadians were able to save about 20 per cent of their income two decades ago, while today’s workers are saving only about 5.5 per cent.
Despite the disparity, pension reform doesn’t look like it will be in the cards anytime soon.
Why? The federal government blames its reluctance on the economy. Enriching CPP is basically a tax on employers that must match contributions of employees, so the thinking is that due to our fragile economy, a hike in contributions will be tough on business — the nation’s economic drivers.
But if we go back to 2003, when the contribution rate rose to 9.9 per cent from six per cent, there was hardly, if any, impact on the economy. In fact, it was the start of boom times across the country.
Granted, no one wants a hike in contribution rates when times are tough, but at least planning for an increase when the nation’s finances are again on solid footing, makes sense.
Instead, chances are the tough times will only get tougher when today’s generation reaches retirement age.
We Say editorials represent the viewpoint of The Daily News and are written by publisher Tim Shoults, city editor Tracy Gilchrist, or associate news editors Dan Spark and Mark Rogers.