Pension reform crucial

Retiring with dignity is something all Canadians deserve. But across the country, millions of people are facing an uncertain future in retirement.

Our inadequate pension system lags behind other advanced industrial countries in providing decent income security for retired workers. With cooperation and consensus among our provincial and territorial leaders next week in Winnipeg, we may finally have a chance to catch up.

Over the last six months, there has been encouraging movement towards meaningful pension reform in this country. Following the June 2010 meeting of Canada's finance ministers, federal Finance Minister Jim Flaherty announced that the ministers had reached "consensus" to consider a "modest, phased-in and fully funded enhancement to defined benefits under the Canada Pension Plan."

For the two-thirds of Canadian households who cannot save enough to cover basic expenses in retirement, this is very good news. There is, however, still a way to go before these changes become a reality. An amendment to the CPP will require the support of at least two thirds of the provincial legislative assemblies representing not less than two thirds of the population.

Pension talks will continue as political leaders gather in Winnipeg for the Council of the Federation. It is important that our provincial and territorial leaders keep this important dialogue moving forward. The retirement future of this generation and the next depends on it.

Our current system assumes that people will fend for themselves, and the results have been disastrous. When a person retires, the goal is to replace 70 per cent of their pre-retirement income. The expectation is that a combination of public, workplace and private options will provide this income. In practice, however, more and more seniors are discovering that these three pillars are not as supportive as they should be.

Workplace plans are a crucial income provider. But right now in Canada, 11 million workers, fully 65 per cent of the total workforce, have no workplace pension plan. In the private sector, just one in five workers belongs to an employer pension plan.

Private savings plans are expensive and increasingly risky. In fact, the RRSP retirement savings model is struggling because too few Canadians are able to afford contributions -- out of all tax-filing Canadians, only 25 per cent can afford to buy RRSPs.

Even those who do have pension plans and savings aren't in the clear. The global meltdown has exposed RRSP investments to extreme risk and significant financial loss.

The remaining pillar -- available to all Canadians -- is the Canada Pension Plan. It is the safest, most secure retirement income available. In fact, the Organization for Economic Cooperation and Development recently confirmed that CPP had one of the best-performing investment returns during the boom-bust period. But for all its achievements, the CPP at its current rate is not enough.

At present, the CPP only provides 25 per cent income replacement of the average wage to a maximum of $47,200. This means that as of 2010, the maximum monthly payment for CPP benefits is only $934.17 to a 65 year old who had maximum participation in the work force and maximum earnings.

More realistically, the average retired Canadian receives only $502.05 per month. Here in Manitoba, the average monthly payment is even lower, at $490.18 per month.

Given that the CPP is increasingly the only retirement income option for millions of Canadians, it is imperative that our governments act quickly to expand it. A phased-in doubling of CPP benefits to equal 50 per cent of the average wage, funded by a modest increase in employer and employee premiums, would provide secure, fully portable, universal coverage to all workers in all industries.

Canada is at a social policy crossroads, not unlike 40 years ago when, as a country, we decided that all citizens deserve universal access to medical care. We are staring down a once-in-a-lifetime chance to help all Canadians save for a better retirement. With the political will of our federal and political leaders, we can make it happen.

Paul Moist is president of the Canadian Union of Public Employees.

Republished from the Winnipeg Free Press print edition July 31, 2010 H11