April 23rd, 2021

Viewpoint: The Canadian pension crisis

By Medicine Hat News Opinion on April 1, 2021.

Prime Minister Trudeau and the Leader of the Opposition Erin O’Toole claim they are committed to better the middle class. This is an honourable goal, but is it political talk rather than a real interest to legislate for improvement?

One issue which affects us all has received minimal attention by our leadership, our media and many Canadians: the growing pension crisis. Statistics Canada reports two groups, one with a pension plan (about 35 %) and a larger group without any plan (about 65 %). The former group divides nearly evenly between the public and private sectors, but the larger group is in the private sector.

The first group has numerous plans including defined contribution and defined benefit. The first one includes equal contributions by the employees and their employer, but it excludes a calculation of the pension. The fund at retirement will determine the pension. The defined-benefit plan includes a calculation of the pension. The employees’ contributions are pre-determined, but an actuary calculates the employer’s share.

Employees without a plan have the RRSP to invest funds to grow for retirement. Revenue Canada exempts the taxes during investment, but this deferred tax is payable when the pension is received.

Both groups will contribute to the Canada Pension Plan. Employers match their employees, and the self-employed may participate by paying both premiums. At age 65, the Old Age Security is payable to all workers. Why is the OAS even paid to retirees with either a public or private pension plan?

Governments commit tax revenues to the pensions of public-sector workers and they also guarantee these pensions. But, these politicians have completely ignored the plight of the 65% group, which is a source of tax revenues, but they must fend for themselves. The politicians of southeastern Alberta appear to consider guns a more important issue.

In some plans, the terms are quite generous. Age 55, plus 30 years of experience, will enable retirement with a pension approximating 70% of the highest earned salary. The plan for MPs is the most generous. Six years of service will pay a pension from age 65. For example, Ralph Goodale from Regina has an annual pension of $ 176,000 after 23 years (Canadian Taxpayers’ Federation). His pension fund is about $4.1 million. He contributed approximately $451,000 (11 %) with compounding; the taxpayers’ share is $3.65 million, a ratio of 1:8.

Our pension system is broken, reforms are long overdue. The disappointment is that the 65% group has no spokesperson to lead for meaningful reforms. A decision to provincialize the Canada Pension Plan could be part of the initial funding of a provincial pension plan for all Albertans.

Another alternative is for the three levels of government to investigate together a Guaranteed Annual Pension Plan to replace the current fractionated system so that the plan pays a pension for at least a moderate lifestyle for all Canadians. GAPP should replace CPP, OAS, GIS, public-sector pensions and other plans, even private ones. It should take pensions out of collective bargaining. This major national undertaking will require time and consultation with experts and the affected groups. The question now, do our elected officials consider this issue important enough to initiate the process for reforms?

Larry Samcoe is a Medicine Hatter. His column, Viewpoint, will run on the first Thursday of each month. Feedback can be sent to letters@medicinehatnews.com

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