For years, Canada’s retirement savings system has been the ticking time bomb in public policy that successive federal governments have failed to defuse.  The global financial crisis made its critical flaws impossible to ignore but also demonstrated what New Democrats have long argued: public pensions are rock solid compared to private pensions and retirement savings.

In the last year, RRSPs lost as much as 50 per cent of their value and company pension plans suffered huge losses.  Some are even being wound-up, their sponsors having gone bankrupt.  Private retirement savings have proven an unsustainable, unfair and risky proposition for many Canadians. 

By contrast, the size of the Canadian and Quebec pension plan funds (CPP/QPP), along with limitations on their risk exposure, mitigated market losses and ensured its sustainability.  This is why the public pension system must be reformed so that they remain the foundation of our retirement savings system. 

In Canada today our public pension system faces what I call a crisis of equity.  Almost 300,000 seniors live in poverty; 69 per cent of them are women.  Those are unacceptable figures.

The system also faces a crisis of sufficiency – benefits will not ensure a comfortable retirement.  Relying solely on even the maximum Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits leaves recipients $4,000 below the urban poverty line. Combined, the CPP/QPP and OAS/GIS provide a maximum of just 38 per cent of pre-retirement income. Experts say 70 per cent is necessary for retirement security. 

The shortfall is meant to come from RRSPs, company pensions and other savings but recent events have shown just how fragile those can be. The result of this insufficiency is that millions of Canadians, despite having paid into CPP/QPP all their working lives, face a retirement lacking in dignity and ease, if not outright poverty. 

In a country of Canada’s prosperity, that is simply unacceptable.  Swift action is needed to reform the system.

New Democrats propose increasing funding to the GIS to eliminate seniors’ poverty.  The program is entirely within federal control, meaning it can be changed immediately.  Statistics Canada estimates that the poverty gap for seniors is less than $700 million, making it an affordable expenditure to lift nearly 300,000 Canadians out of poverty.  After all, another $8 billion of corporate tax cuts are scheduled by 2013-14.

We also propose phasing in a doubling of CPP/QPP benefits to a maximum of $1,817.50 per month – at no cost to the government as CPP/QPP is funded by worker and employer contributions.  We would increase the size of contributions allowed by an additional payroll deduction of 2.5% (about the average RRSP administration fee).

This would tackle the crisis of sufficiency by raising the maximum coverage of OAS and CPP/QPP to 63 per cent of pre-retirement income.  It would take the pressure off both household savings and private workplace plans and create a more stable savings environment.

New Democrats also have concrete proposals for private plans, including a self-financing national pension insurance program and mechanisms to protect pension funds when companies go under.

While the Harper Conservatives are tinkering at the edges of pension reform and the Liberals are only just starting to talk about the problem, we have already put concrete and comprehensive proposals on the table.

What we want to see now is Mr. Harper getting serious about the pension problem.  The reforms we propose can be undertaken immediately.  A more secure, more comfortable retirement and an end to seniors’ poverty are achievable, but to get there Canada needs decisive and comprehensive.

Author: By Wayne Marston NDP Pensions Critic