Retirement security; income security for persons with disabilities; our veterans

Retirement security; income security for persons with disabilities; our veterans

GPC 2015 platform background paper

We are living longer.  While this is unquestionably good news, a great many of us haven’t saved enough for a longer retirement. A weak economy has caused frightening collapses of some private pension funds, and younger Canadians are questioning whether the public system they are contributing to today will be there for them in future decades. Instead of unilateral government pronouncements, it’s time for sensible public discussion about how to build a retirement and disability security system that is fair and sustainable. The Green Party supports an expansion of the Canada Pension Plan (CPP/QPP).

We need to streamline the patchwork of disability-related programs for persons with disabilities to ensure adequate income support. This could involve a National Disability Insurance Scheme.  We must immediately take action to greatly expand support for veterans and their families.  Those who have served and sacrificed for our country deserve our grateful and ongoing support, and secure and generous pensions. 

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Retirement security has been on the public agenda for some time, but political leadership on this issue has been sadly lacking. Governments that want to build strong support for reforms must inspire younger Canadians to trust that changes are designed with a view to the long term and across generations.

Despite our need for these kinds of assurances, the Conservative government’s proposals relating to retirement were introduced in an unnecessarily adversarial environment. For example, the government increased the age of eligibility for Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) from 65 to 67, without public or federal-provincial consultations, and ignored the advice of the Parliamentary Budget Officer.  The federal government overlooked the evidence that increasing the eligibility age simply transferred more people to the provincial welfare rolls. Nor was there any discussion about how to address the greater impact of the changes on those who are particularly vulnerable – women, immigrants, and persons with disabilities. As part of a wider reform, the Green Party supports integrating the OAS and GIS into the Guaranteed Liveable Income (GLI) explained above [Fair taxation and a liveable income].  In the interim, the Green Party will consider restoring OAS eligibility to age 65 following discussions and debate in a parliamentary committee that results in a broadly acceptable, financially-sound, consensus position.

Notwithstanding the best intentions of the government that introduced Registered Retirement Savings Plans (RRSPs), most Canadians do not save enough for retirement. Two-thirds of working Canadians do not have workplace pensions. The vast majority of the one-third of workers who do have workplace pensions consist of public sector workers – 85% of public sector workers have a workplace pension, compared to only 25% of private sector workers. Only one-third of Canadians have an RRSP (94% of the total RRSP contribution room is unused). The Canada Pension Plan/Quebec Pension Plan is therefore a critical component of all Canadians’ retirement plans, together with OAS and the GIS, which have done much to keep many elderly Canadians out of poverty.

The Conservative administration’s preferred tool to encourage greater pension saving has been Pooled Retirement Pension Plans (PRPPs). Initially, PRPPs were supposed to help smaller companies provide pensions by permitting multiple employers jointly to sponsor pension plans and allow self-employed workers to join PRPPs. However, few smaller companies and individuals have shown any interest in participating in PRPPs. One further challenge is that PRPPs are voluntary and are unlikely to be cost-effective – fees are too high, and PRPPs involve very low and inadequate contribution rates of 3% to 5%. Provinces have not enthusiastically embraced the concept and passed coordinating legislation.  Quebec, however, introduced a similar VRSP in March 2012, which automatically enrols employees after one year of service (for companies with greater than 5 employees), but workers can choose to opt out of these savings plans within 60 days of being enrolled.

In refusing even to consider expanding the CPP, the Conservative administration has ignored the advice of its own Department of Finance.  An internal Finance Department study in 2013 found economic benefits to a CPP expansion such as higher consumption by seniors, and concluded that higher premiums would not dampen job creation once the economy is less fragile. Many Canadians understand the need for government to encourage savings for their retirement, and in the 2014 Ontario provincial election, Ontario voters decisively rejected the Harper voluntary PRPP proposal and supported the Ontario government’s proposed expansion of the CPP, even if implemented only in their province.

To help Canadians with their retirement security, the Green Party calls on the federal government to take the lead in building a consensus with the provinces to amend and expand the CPP/QPP, still the largest and most efficient pension arrangement in the country. Amending the CPP requires the agreement of at least seven provinces representing two-thirds of Canada’s population.

The CPP covers all Canadians, including the self-employed and workers without a workplace pension plan. Currently employees and employers contribute an equal amount – 4.95% (a combined 9.9%) of an employee’s annual earnings up to a maximum of $52,500.  The self-employed pay the full 9.9% as long as they have minimum annual earnings of at least $3500.

The proposed Green Party expansion could involve two things: phasing in over 5 to 7 years, a doubling of the Year’s Maximum Pensionable Earnings (YMPE); and gradually increasing the maximum CPP benefit from 25% of the YMPE to, say 40%.  Currently the YMPE is set at $53,600, and an individual’s defined CPP benefit upon retirement maxes out at 25% of the YMPE up to the $53,600 maximum. This would require an increase in the contribution rate. (Under CPP rules, any new benefit has to be fully-funded, so this would have to be phased in over a period of 5 to 7 years to build up enough capital to pay out benefits).

Ontario provides a potential model as a basis for negotiating a broader CPP expansion with all provincial governments.  Ontario has proposed a provincial expansion that would require employers and employees to contribute a combined 3.8% of an employee’s annual earnings up to a maximum of $90,000. It is unclear whether this will apply to the self-employed. The aim is to phase in the new benefit over two years commencing in 2017 when it is expected that EI premiums will be reduced. Ontario has indicated its willingness to integrate its provincial retirement benefit with any CPP expansion.

Canadians who wished to save more than the new CPP maximum benefit could also be offered a publicly run alternative to private investment funds by allowing them to make additional voluntary contributions to their individual CPP/QPP pension accounts which are managed on their behalf by the respected autonomous and impartial CPP Investment Board. This would likely benefit from lower management fees and higher rates of return compared to those of traditional mutual funds. This option will be of particular interest to younger Canadians and lower-wage workers who support the CPP as a straightforward, secure portable option for saving that kicks in wherever they may work across Canada. This option will also be important if the self-employed are not included in the core CPP expansion. Stay-at-home parents could also decide that a voluntary contribution is preferable to the rather limited child-rearing CPP adjustment. The U.K. model could be followed to provide additional savings: the supplementary pension contribution would be automatically deducted from one’s salary, but individuals could opt out of the deduction. Of course there would be no matching employer contributions for this option. (This proposal is completely distinct from the cynical election-driven empty announcement by the Conservatives in May 2015 to consider a limited, undefined voluntary expansion of the basic CPP.)

Private pension plans can and do collapse for many reasons. A company may run into trouble, or the pension plan may invest badly or lose value because of the vagaries of the stock market. Of course companies will take steps to cover shortfalls if possible, and both the federal and provincial governments have eased regulations to give struggling companies more time to do so. A company that goes bankrupt, however, is usually relieved of its pension funding obligations, leaving its retirees out in the cold. The federal government should take immediate steps to ensure pensioners are well protected in the event of a company’s bankruptcy. Nortel pensioners learned the hard way that company pensions must be secured from creditors in the event of bankruptcy.

Better support for persons with disabilities

The Green Party believes that we must urgently review the safety net for persons with disabilities. Those who are most in need must have adequate income support. Currently Canada has a patchwork of seven different disability-related programs: Canada Pension Plan disability benefits, the Employment Insurance sickness benefit, veterans’ disability pensions and awards, workers’ compensation, the disability component of social assistance, disability tax credits, and the Registered Disability Savings Plan. Some private disability insurance is also available.

We need to streamline programs. The Green Party’s proposal for a Guaranteed Liveable Income (GLI) will be a key step in consolidating the various disability tax credits [Fair taxation and a liveable income]. With or without a GLI, there would also be merit in possibly following Australia’s lead in implementing a broader National Disability Insurance Scheme, something promoted in Canada though the Every Canadian Counts initiative.

Caring for our veterans

In terms of caring for those who have served and sacrificed for our country, Canada’s track record is appalling. Our veterans have been abused particularly by the federal government’s efforts to claw back their Veterans’ Affairs disability pensions, to say nothing of the challenges of negotiating a system which is both paternalistic and patronizing. It is outrageous that veterans had to spend five years in the courts to convince Ottawa, finally, not to reduce their long-term disability benefits.

Veterans deserve our grateful and ongoing support and secure and generous pensions: the nickel-and-diming of their financial assistance by the Conservative administration is nothing short of a national disgrace. 

The Green Party was relieved to see the federal government withdraw its appeal of the favourable BC Supreme Court judgment in the “EQUITAS” legal challenge, launched in 2012 to argue that the current veterans’ benefits should not be much less than those received by veterans of the world wars and Korea.  The federal government has promised to pass legislation confirming the obligation “to be liberally interpreted” to provide “services, assistance and compensation to members and veterans who have been injured or who have died as a result of military service, and this extends to their spouses or common-law partners or survivors or orphans.”

The Green Party will be vigilant in holding the federal government to its promise to rectify the distressing inequities in veterans’ income support prior to the scheduled resumption of the EQUITAS legal challenge in 2016.