The decision by 91原创 finance ministers to strengthen the Canada Pension Plan is not about today鈥檚 seniors, but about the seniors of the future. It鈥檚 a wise move.
At a meeting in 91原创 Monday, the country鈥檚 finance ministers, except those of Quebec and Manitoba, agreed to revamp the CPP. Starting in 2019, contributions for a typical worker earning about $55,000 would initially increase by $7 a month and employers would match those contributions.
The plan would be phased in over seven years until 2025 and it means when people retire, their maximum annual benefits would increase by about one-third to $17,478.
Critics of the move to expand the national pension plan say it鈥檚 not necessary, that the number of 91原创 seniors struggling with poverty is not increasing and that 91原创s, in general, are doing reasonably well in planning financially for retirement.
To say that today鈥檚 seniors are doing well is missing the point 鈥� the proposed changes will do nothing for them. This is about giving tomorrow鈥檚 seniors the hope of a decent retirement income.
The old refrain about 鈥渢hings were really tough when we were young鈥� has been turned on its head. Today鈥檚 workers face a leaner, meaner world than that experienced by their parents. Many of the younger generation are working part-time or on contract, with few or no benefits. The number of workers with company retirement plans is declining 鈥� Statistics Canada says the pension-plan coverage rate in 2013 was 37.9 per cent, down from 38.5 per cent in 2012.
With skyrocketing house prices, such as those on the Island and the Lower Mainland, fewer people will be able to achieve the dream of owning a home, traditionally seen as one of the foundations of a comfortable retirement.
Many of those who do buy homes will have mortgage payments that leave little room for retirement savings. There鈥檚 a growing risk that housing prices will crash, erasing equity and further threatening the prospects of building up post-retirement assets.
Another criticism is that the CPP change is another example of a Liberal spending spree, but it鈥檚 not spending, it鈥檚 saving. It鈥檚 not money that will be frittered away on boondoggles and party-boosting projects, but a sound investment. And it has broad political support.
It will not come painlessly, especially to small businesses, for whom the extra CPP contributions could be burdensome, and to those in lower-income brackets who will feel the pinch on their paycheques. But the amounts involved are not egregious, and a little pain today will prevent a lot of pain tomorrow.
No one should rely solely on the CPP for retirement income. Even with the proposed increases, it will not be sufficient. Through education and tax breaks, the government should encourage retirement savings, as well as participation in private-sector pension plans.
Any CPP change requires the consent of at least seven provinces representing two-thirds of the country鈥檚 population. It鈥檚 still not clear if the changes have that support, but we hope that support comes.
As a society, we have to recognize that people are living longer with fewer opportunities to save for retirement. Enhancing the CPP isn鈥檛 about appeasing the electorate with an eye on the next election cycle, but about preventing armies of poverty-stricken seniors 40 or 50 years from now.
