Creaking pension system is failing Canadians

TheStar.com – Opinion/Comment – Creaking pension system is failing Canadians: Only one in five private-sector workers belongs to an employer pension plan and just one-third of households are saving enough to cover basic expenses in retirement
Published On Wed Dec 16 2009.   Paul Moist CUPE National President

When Canada’s finance ministers meet this week in Whitehorse to discuss our national pension system, they will have the opportunity to create a plan of action that ensures no Canadian worker will have to retire in poverty.

Canada’s pension system is inadequate and lags behind other advanced industrial countries in providing decent income security for retired workers. It’s time to catch up.

Retirement security shouldn’t be an ideological or a partisan issue. Retiring with dignity is something we should all be entitled to – whether we’re unionized or non-unionized, whether we work in the public sector or private sector. On this matter, there is broad consensus. Political parties, premiers, the trade union movement and CARP have all urged pension reform so that more Canadians can have fair, sufficient and secure retirements.

We have seen consensus and desire for change because so many people stand to benefit from pension reform. Similarly, if things are left as they are, an increasing number of Canadians will face an uncertain future in retirement.

Right now, 44 per cent of working people have no retirement plan or RRSP. In the private sector, only one in five workers belongs to an employer pension plan. And only one-third of Canadian households are saving enough to cover their basic expenses in retirement.

Pension funding issues, bankruptcies and the lack or loss of personal savings have, unfortunately, left more Canadians to rely solely on Old Age Security and the Canada Pension Plan in retirement. Those retirees, who receive an average of $500 per month, are living in poverty.

It is important for governments to recognize that over the next 30 years, the percentage of Canadians over 65 is expected to double. The influx of baby boom retirees, coupled with a higher life expectancy, will put unsustainable pressure on our retirement system – and on the next generation of workers.

As retirement costs rise, we can expect the quality of post-retirement benefits to decline, with the onus for retirement savings moving from employer to employee. For example, we are already seeing many workplaces move from defined-benefit pension plans to defined-contribution pension plans.

In defined-benefit schemes, employers usually assume the risk if the fund is not at a sufficient level. And when workers pay into a defined-benefit plan, they know exactly how much they will get out at the end. The inferior defined-contribution plan is a “no promises” plan – the only thing definite about these plans is how much a worker pays in. What a worker gets upon retirement is entirely dependent on markets and investment practices. And if the markets take a dive – like they have recently – employers are not on the hook to backstop a defined-contribution plan.

Across the country, workers are already confronting pressure to move to riskier pension schemes. In Sudbury, workers at Vale Inco have been on strike for five months, hoping to prevent defined-contribution pension plans from being imposed on new hires.

There is no reason why working Canadians should have to watch their retirement options deteriorate. This week in Whitehorse, our finance ministers can take the first steps toward creating a retirement security system that will work for all Canadians.

We can fix Canada’s pension crisis by strengthening the Canada Pension Plan with a phased-in doubling of how much we pay in, and how much we get out in retirement. This would offer secure and enhanced pension benefits for the 93 per cent of Canadians who make CPP contributions.

A gradual, doubling of CPP benefits would provide a universal pension plan, at a decent income level, one that would not penalize workers who change jobs. Further, as the CPP actuary has said, it is a secure plan through 2085, long after the current wave of baby boomers retires, and would provide a stable future for the next generation of workers.

We can also enact better legislation to protect existing workplace pension plans from bankruptcy, high-risk investments and underfunding from employers. This year, Canadians watched Nortel employees fight their bankrupt employer for severance packages, pensions and disability payments – with no guarantee they will be paid. Our finance ministers can make sure this never happens again.

The retirement future of this generation and the next deserves more than a series of discussions. These talks should lay the groundwork for comprehensive pension reform so that the working men and women who helped build our economy can retire with the security and dignity they deserve.

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