Where are we on CPP?
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CPP?
Which CPP increases are you referring to? Are you talking about yearly increases? We are unfortunately a slave to the retiring generation who elected successive governments who failed to meet the necessary CPP inputs. I'm not really for starving seniors, so we seem to be in a bit of a bind.
If you are talking about the push to make CPP a more meaningful pension plan, then I fully support some sort of forced pension savings plan regulated by the government. I personally believe the CPP would be a good option, but I understand that others may want more flexibility. Regardless, the current pension system is *not* sustainable. People cannot afford to retire, and are generally not competent enough to save for retirement. Thus, we end up topping up people's retirements with social security payments.
The purpose of a some sort of minimum mandatory pension savings prevents people from coming to the trough when they retire broke. To alleviate pressure on the poor, a block of income under a prescribed limit would be exempt or provided by government tax credit. Participation would be a fraction of earned income up to some ceiling.
Prices will decrease in relation to the reduced disposable income. The overall affordability of things would be roughly the same and in fact, it is the producers who will get hit the most, which may be non-intuitive, but nonetheless it is true.
Its more complicated than
Its more complicated than that. Canadians, not just boomers, have not saved enough and continue not to save for retirement. In fact the current generation have taken on enormous debt - unprecedented, let alone not saving. (I don’t want to get into a generational conflict here.) Many people have had their company (defined benefit) pensions literally stolen from them by the company or its creditors. They paid into it (contributory) for their whole lives, or they created the profits (so-called ‘non-contributory’) which were supposed to be used to fund it – defined in a legal ‘employment contract’ which our banking laws ignore. Its not the company’s money, its not the creditor’s money it was the employees’.
So if private pension plans can’t be trusted. And if Canadians still spend money they don’t have to move forever up the real estate ladder, and get the latest shiny vehicles and gadgets rather than invest for the future, what are the alternatives?
Defined personal matching contribution (saving) plans with employers – perhaps make them mandatory to some degree, and a general portable pension plan (CPP).
I guess the real issue here
I guess the real issue here is whether to make the increases in CPP voluntary or mandatory. I originally heard there was going to be an optional "opt-in" increased CPP, which was perfectly fine with me, because I would "opt out". Everyone's situation is different, and I know enough to know that many people would need this additional savings to retire comfortably. In my case, I have a public-sector pension plan which pays considerably, but which I already pay considerably for. So that, along with current CPP levels, will be good enough for me. The reason I don't want to pay more towards retirement is not because I purchase the latest gadgets or climb further and further up the real estate ladder, but because I'm trying to make a living in a middle-class job. And it's my right to choose how to prioritize my life. Retirement is not the be all and end all, you have to enjoy life today too. That's why I believe in everyone designing their own retirement nest egg, not a "one size fits all solution".
Forcing more savings or forcing more government help
I basically agree with you Trevor, that people should be (more) responsible for their own retirement. I’d say that goes hand in hand with the Green value of being fiscally responsible, in this case fiscally responsible for yourself.
However, the fundamental issue with our system seems to be that people just don’t save enough. It’s a fact that we can’t wish away. Incentives to save for retirement, such as RSP’s are so under-utilized that some critics call this a benefit only for the ‘rich’ who can afford to put aside some money into an RSP.
Whenever something goes wrong with retirement funds the government is usually on the hook anyway whether it be by having to bail out a car company with a $7 Billion deficit in their pension plan or providing OAS/GIS to people who don’t have enough retirement income.
I think the only practical answer to stop the government and tax payers to stop being ‘forced’ in this way is to force more savings and to ‘force’ more prudent pension funding standards. The most practical vehicle in place already is CPP. This doesn’t have to mean that people on other pension plans would have to contribute more though, not unless those pension plans were going to provide even fewer benefits than CPP.
Squeezing a little more out of CPP is still not a complete answer. Some people are never in the work force or only for part of their potential working years. For example, people who ‘stay at home’ whose work is not officially paid for (stay at home mothers is the classic example) aren’t paying for CPP and are hence not accumulating any CPP benefits.
Of course there’s also the Green initiative to get a “minimum guaranteed income” in place for everyone, not just retired people. That would even the playing field for all but we are still a long way off from being able to implement something like that.
In the end I suppose it all works out to pretty much the same thing. When the government needs to make up short falls the tax payer is providing the funds. When the governemnt forces more retirement savings the tax payer is providing the funds. Still, all things being equal, I'd prefer more individual responsibility.
Ard Van Leeuwen (Dufferin-Caledon, ON)
The views I express on this blog are purely my own and should not be construed to represent the official position of the Green Party of Canada.
Right on!
As usual, Ard, you are bang on! Looking forward to voting for you again!
If you already pay into a
If you already pay into a rock-solid secure government pension plan, then that should be taken into account. i.e. a holistic approach. There should be a limit on the total contributions an individual is making to secure pension plans as a percentage of their income. You already have enough forced savings. If you opt-out of an increased CPP contribution, then your eventual CPP payout would be less, but that's OK if you already have a decent govt. pension.
Similar to RSP's - there's a limit of what you can contribute based on your expected pension earnings.
Agreed
Agreed! That is pretty much exactly what I am saying. The thing is, everyone's situation is different. If I did not live in an area where the cost of living is so high, these increased contributions would not be as much of an issue as they are, so I would be glad to contribute more to have more when I retire, since I could easily afford to. So where a person lives and their cost of living becomes a huge factor. I understand that this has been raised as support for the increased CPP, as retirees can't afford to live in Toronto on current CPP/GIS etc. levels. I don't really buy this argument, however, because as harsh as it may sound, retirees can live anywhere, whereas those in the workforce have to go within commuting distance of their job. It's a totally different situation which is, again, why a one-size-fits-all approach does not work.
Cheers,
Trevor