As Canada’s population rapidly ages, financing retirement has become a huge concern. Existing public pensions won’t provide enough money, entitlements and personal savings are inadequate, and company pension plans are either underfunded or cover too few people.
All this adds up to growing pressure on government to come up with new public pension offerings to help fill the gap. There are two proposals that could gain traction.
The first is the Canada Supplementary Pension Plan, an idea first promoted last year by pension guru Keith Ambachtsheer from the CD Howe Institute.
The CSPP would work like the CPP, with voluntary payroll deductions (to an annual maximum of $20,000) put into individual retirement savings accounts. The funds would be managed by a body that is arm’s length from government, not unlike the Canada Pension Plan Investment Board. The goal would be to combine eventual income from the CSPP with other forms to replace at least 60 per cent of pre-retirement income.
A second proposal is the Universal Pension Plan espoused by the Canadian Association of Retired Persons (CARP), the lobby group for middle-aged and senior Canadians. The UPP would essentially be an extension of the existing CPP and would also be similar to the CSPP.
Unlike the CSPP, however, contributions would be mandatory, and the goal would be to replace 70 per cent of pre-retirement income.
Other variants of public plans are being talked about in Alberta and British Columbia. So far, Ottawa is ignoring the issue, perhaps because it has more immediate problems.
The pension crunch isn’t going away, though. If you believe CARP, it won’t just be the poorer classes that will strain to make ends meet for the rest of their lives.
It’s already happening. Go into any big box retailer and check out the staff. Chances are many are people who have “retired” from their principal jobs, but who seriously need this income.
For younger baby boomers, those who have a decade or so before normal retirement, the prospect of working indefinitely won’t sit well. Count on them putting the heat on politicians to extend the CPP or come up with an additional plan. Of necessity, a new era of pension reform is upon us.