Old age blues

As stock market meltdowns gut our RSSPs and threaten company pension plans, it’s time to better fund the Canada Pension Plan.

As Canada's finance ministers discussed pension reform at a seaside resort on Prince Edward Island last week, about 125 union members marched outside the gates chanting, "Hey-ho! Hey-ho! CPP has got to grow." The workers, who sported blue t-shirts emblazoned with the words "Retirement Security for Everyone," also waved placards calling on federal and provincial governments to "Expand Our CPP Now!"

The letters CPP refer to the Canada Pension Plan set up in 1966 and financed ever since by payroll contributions from workers and their employers. Today it provides an average annual pension to retired women of about $4,700, while retired male workers get an average of about $6,800. Women receive smaller CPP pensions because they earn, on average, less than three-quarters of what men get paid. Obviously, at those stingy levels, CPP retirement benefits won't make anyone rich even when combined with the basic old age pension and the guaranteed income supplement. That's why old people who have no private savings or company pensions are scraping by close to or below the poverty line.

No surprise there. Canada has always lagged well behind other industrial countries when it comes to the size of public pensions. In her 1988 book, Whose Money Is It Anyway? The Showdown On Pensions, journalist Ann Finlayson explains why. She points to "deeply ingrained traditions of individualism, self-sufficiency and the sanctity of the free marketplace." Finlayson describes how Canada's insurance companies, banks and investment firms have always fought tooth and nail to keep public pensions to a bare minimum so that they could profit by peddling their own outrageously expensive retirement plans. Now, with the stock markets in free fall, Canadians who did manage to salt money away in RRSPs are watching their retirement savings evaporate. The market meltdown is also threatening the solvency of many company pension plans while workers whose employers are going bankrupt because of the recession are losing the company pensions they paid into.

That's why finance ministers were discussing modest increases in CPP benefits last week. But modest increases won't be enough to provide adequate pensions. What we really need are basic improvements in public pensions. The Canadian Labour Congress, the umbrella organization for unions in Canada, has outlined a plan to improve old-age pensions while doubling CPP benefits over seven years. Those benefits would be financed by a modest and gradual increase of just over two percent in payroll deductions from workers, matched by an equal contribution from their employers.

Unfortunately those reforms aren't likely to happen as long as right-wing ideologues like federal finance minister Jim Flaherty are in power. Yes, Flaherty's the guy who quietly bailed out the big banks by buying up $125 billion worth of their shaky mortgages. He also crusaded loudly against a bank bailout tax. Instead, as columnist Ralph Surette pointed out in last Saturday's Herald, the Harper government is slashing corporate taxes, handing the banks hundreds of millions of dollars at a time when they're making billions in profits and paying their execs billions in bonuses. So, don't expect Flaherty to displease his banking friends by improving public pensions.

Flaherty is helped by ill-informed journalists who perpetuate myths about the Canada Pension Plan going broke paying benefits to hordes of aging baby boomers. Fact is, pension experts agree the CPP is financially secure for at least 75 years. Another media myth is that younger workers will pay way more in CPP contributions than they will ever receive in pensions. Fact is, younger workers would benefit most from any improvements to the CPP, even modest ones, because the longer workers contribute, the more they earn in inflation-protected benefits. Propaganda that tries to pit one generation against another won't work anymore. It's plain that a massively corrupt financial system triggered the worldwide economic meltdown. So, why should we continue to trust bankers with our retirement savings?

Hey-ho! Hey-ho! CPP has got to grow.

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