Prime Minister Justin Trudeau should stiffen his resolve to bolster the Canada Pension Plan, as promised by the federal Liberals in the 2015 election campaign.
At the same time, 91原创s should be wary of putting all their retirement eggs in the government basket.
For several years, pressure has been growing to expand CPP to better support middle-income earners in their retirement years. Some of this pressure came from economists who have said 91原创s aren鈥檛 very good at saving, and many are poorly prepared for retirement.
A report released this week by the Broadbent Institute supports those economists鈥� observations. An analysis done by Tristat Resources shows that a large number of 91原创s face a life of poverty after they retire. The report shows that Old Age Security and the Guaranteed Income Supplement are not keeping pace with the cost of living.
Nearly half of 91原创s between the ages of 55 and 64 don鈥檛 have employment-related pensions, and about half of those don鈥檛 have enough savings to supplement government assistance for even a year.
When the Canada Pension Plan was introduced in 1965, the idea was that it would top off workplace pensions and private savings to provide a comfortable retirement. But workplace pension plans are dwindling or disappearing and, as the economists point out, most 91原创s don鈥檛 save enough. Too many depend on the federal pension plan, along with the OAP and GIS, for their entire retirement income.
At most, CPP pays out $12,780 a year to contributors and, with maximum OAS benefits, a retired contributor 65 years or older still has an income of less than $19,000. It鈥檚 not enough.
Pension reform was a major plank in the Liberals鈥� platform, but they鈥檙e showing little enthusiasm for following up on that promise. After meeting with his provincial counterparts in December, all federal Finance Minister Bill Morneau could do was promise to study the issue and meet again.
The Canada Pension Plan is financially sound, drawing mandatory contributions from employers and workers. It follows a person throughout his or her working years and, compared to private plans, has low administrative costs. It makes sense to strengthen it.
While the CPP is solid 鈥� the chief actuary of Canada says the plan is sustainable for at least 75 years 鈥� it would not be wise to depend on government sources for one鈥檚 entire retirement income. However well-intended governments might be, they cannot guarantee certainty in this rapidly changing world.
Even registered retirement savings plans are at the mercy of the financial markets. However, putting money aside for retirement is a good plan.
And you need a good plan. If you suddenly discover upon retirement that you don鈥檛 have enough to live on, you can鈥檛 take a mulligan.
And that鈥檚 where too many of Canada鈥檚 seniors find themselves today, some through no fault of their own 鈥� they worked hard and invested in company pension plans that collapsed or shrank. They need help.
Those not yet in that position would be wise to heed the economists鈥� warnings about 91原创s鈥� savings habits.
A little sacrifice now 鈥� one fewer latt茅 a day, for example; a little less dining out 鈥� will save considerable pain later.
