Retirement Security

Fraser Institute fails to make case for RRSPs: Flawed study attempts to attack expanded CPP

June 25, 2013
OTTAWA ― The President of the Canadian Labour Congress says that the Fraser Institute has unwittingly made the case for expanding the Canada Pension Plan and making it the preferred retirement savings option.

“Experts agree and all of the evidence shows that the CPP is by far the best way to guarantee financial security for people in retirement.” says CLC President Ken Georgetti. “The Fraser Institute, for its own ideological reasons, would rather promote RRSPs, which allow the financial services industry to charge some of the highest management fees in the world to Canadians trying to save for retirement.”

Georgetti was responding to the release by the Fraser Institute of a study called, “RRSPs and an Expanded Canada Pension Plan: A Preliminary Analysis.” The study attempts to show that an increase in CPP contribution rates between 1993 and 2003 caused a decline in contributions to RRSPs over that period. The Institute believes this to be a bad thing.

“The Fraser Institute’s analysis is weak,” says Georgetti, “but the more important point is that RRSPs have failed Canadians. Compared to the CPP, RRSP mutual funds are inefficient and expensive, and they are a tax subsidy disproportionately paid to high-earners who can afford to buy them. RRSP funds are commonly withdrawn before retirement age, something that can’t happen with the CPP, and unlike RRSPs, your CPP benefit doesn’t depend on whether the stock market had a bad day or not.”

Georgetti points to well-known experts who agree that RRSPs have failed and that the CPP is worth expanding. “Don Drummond, former chief economist for the Toronto Dominion Bank said in 2009 that although RRSPs have been promoted for 50 years, they just haven’t worked out. And David Dodge, a former governor of the Bank of Canada, said in 2012 that expanding the CPP would help solve many of the problems plaguing Canada’s retirement system, especially given the growing crisis in employer-sponsored pension plans.”

The CLC is advocating a phased in doubling of CPP benefits to be financed by a modest increased in contributions from workers and their employers. “This is clearly the best way forward,” says Georgetti, “but Finance Minister Jim Flaherty seems to be listening to his friends in interest groups such as the Fraser Institute and the Canadian Federation of Independent Business, who are opposed to CPP expansion. We have to convince him otherwise.”

The Canadian Labour Congress, the national voice of the labour movement, represents 3.3 million Canadian workers. The CLC brings together Canada’s national and international unions along with the provincial and territorial federations of labour and 130 district labour councils. Web site: www.canadianlabour.ca  Follow us on Twitter @CanadianLabour

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