Monday, April 20, 2015

Canada is heading for a crisis. Today, seniors make up about 16% of the population, but within a generation that number will grow to nearly 25%. Between now and 2022, over 3 million workers are expected to retire – but many of them already know they can’t afford to.

The legacy of wages that barely keep pace with the cost of living plus family debt levels above 160% of disposable income has Canadians struggling to save what they need for retirement. Families are saving money at half the rate they were 25 years ago. The best available evidence shows that half of today’s middle-income earners born between 1945 and 1970 face a drop of at least 25% in their standard of living when they retire.

The sheer size of the generation about to reach retirement age, combined with inadequate savings will have a dramatic effect the economic health and vitality of Canada’s communities and local economies. Meanwhile, the federal government has changed the rules and made it even harder for people to access retirement income benefits like Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), raising eligibility from age 65 to 67.

Shrinking access to workplace pensions is only making matters worse. Today, less than 40% of workers have access to a pension plan at work. In the private sector fewer than 25% of workers have a workplace pension. For young workers (under the age of 29) the number drops to just 13%.

For their part, employers report that a major reason for not offering a workplace pension plan is the inflexibility, complexity and complications involved. This is especially the case for smaller businesses with relatively few employees.

Pensions are crucially important to the well-being of workers and their families, and the economic health and vitality of our cities and communities. For most workers with a pension, they have a union to thank. In addition to dignity in the workplace and fair compensation that unions bring to the workplace, unions negotiate pensions on behalf of workers. But not everyone has the benefit of a collective agreement or a union in their workplace. Without clear and decisive action from government, many of today’s workers (and tomorrow’s seniors) face living their final years in poverty.

We can do better than this. In fact, there is already a solution that can work, for everyone.

Expanding the Canada Pension Plan (CPP) is by far the simplest and most cost-effective vehicle for both workers and employers to contribute to the cost of a secure and adequate retirement income. Virtually all working Canadians (including the self-employed) participate in the CPP. The plan follows workers everywhere they work in Canada, no matter how many times they change jobs. It provides a predictable, secure retirement benefit that is protected against inflation and continues until death. Plus it does all this at an extremely low cost.

The labour movement wants to see concrete action to improve retirement security for workers and avoid the devastating impact that a retirement income crisis will have. 

The federal government must:

  • Commit to doubling CPP retirement 
  • Reverse plans to raise the age of eligibility for OAS and GIS from 65 to 67
  • Increase GIS benefits to address the rising rate of poverty among Canada’s seniors
  • Improve access to pensions for working Canadians and support existing workplace pension plans