CPP expansion better option

TheStarPhoenix.com – Business
December 10, 2013.   Editorial

According to a study by the Toronto Star, Canada is silently undergoing a massive transformation in its social infrastructure.

Programs that Canadians long have considered sacrosanct are weakening or disappearing, while the tax structure that has long underpinned them is being cut to shreds.

As former premier Roy Romanow told the paper, “It is changing Canada. Unchecked, if we continue down this path, the big danger is a more regionalized and more unequal nation.”

From public health care, which has been put on a serious diet by the feds, to Employment Insurance that has had its rules tightened to the point where only 37 per cent of jobless Canadians qualify for benefits, the impact of these changes are slowly seeping to all levels of Canadian society.

It has been the much-valued Canadian Pension Plan that is under the microscope this week. The federal NDP proposed Monday that the premiums and benefits be gradually increased so that they more closely reflect modern incomes. Next week, provincial finance ministers will meet behind closed doors with their federal counterpart, and similar proposals are expected to be debated.

But Ottawa has balked at increasing CPP payouts or premiums, likening them to a “job killing” payroll tax that could stall Canada’s struggling economy.

What isn’t in debate, however, is how unprepared a growing number of Canadians are for their retirement. Many leave the workforce with no formal retirement plan, having saved far too little through such vehicles as Registered Retirement Savings Plans or tax-free savings accounts. Many retirees still carry debt, including mortgages.

Whether individuals or governments are best positioned to address these shortcomings is the question that bedevils politicians. Some provinces argue that only government mandated compulsory programs can effectively turn the tide. Others argue that Pooled Registered Pension Plans managed by private financial companies gives individuals control over the amount they want to set aside.

However, as people struggle to pay mortgages and raise children, saving for retirement is far from top of mind. For example, as the Globe and Mail noted in an editorial Monday that although RRSPs have been around for years to encourage people to save for retirement, Canadians are sitting on $633 billion of unused capacity. That is, Canadians could be saving more on their own, but aren’t doing so for various reasons.

There is another flaw in the pooled accounts plan. While the CPP has relatively low administration fees because of its size, the greater the number of pooled plans the more that is bled off in such fees. That puts less money in the hands of retirees and more money into the bonuses of wealthy bankers. The federal government’s argument that increasing CPP premiums will cost jobs is predicated on the ideological belief that any tax discourages investment. In fact, keeping seniors out of poverty is more likely to create jobs than providing more tax breaks at a time when doing so is already threatening Canada’s social union.

The editorials that appear in this space represent the opinion of The StarPhoenix. They are unsigned because they do not necessarily represent the personal views of the writers. The positions taken in the editorials are arrived at through discussion among the members of the newspaper’s editorial board, which operates independently from the news departments of the paper.

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