The financial crisis and the recession that followed highlighted a terrible shortcoming in conventional wisdom concerning pensions and retirement security: retirement security shouldn’t be left to the private sector.
For years, registered retirement savings plans (RRSPs) have been sold to Canadians as a smart and safe vehicle for putting away money and ensuring a decent income for retirement. Yet Statistics Canada reported that only 34% of the people who filed their taxes in 2008 contributed to an RRSP, down from 41% in 1997—even after a massive push by government and banks to convince Canadians of the plans’ merits.
The financial crisis has highlighted how the RRSP system has let Canadians down. Even Don Drummond, the TD Bank’s chief economist, has been widely quoted as saying “RRSPs have been a colossal failure.”
During the next decade as many as 2.7 million Canadians will retire and up to 72% of them do not have a workplace pension, leaving them incredibly vulnerable during their senior years.
We saw the public fury that erupted when the right-wing media depicted emergency support for the auto industry as a bailout for the autoworkers’ “rich” pension fund. Citizens were angry that public money could go to bail out a pension fund when they must fend for themselves in retirement. Their anger is understandable, but misplaced.
We should be angry that our retirement income may not be enough to live on and that some elderly Canadians must return to the workforce because our public pension system leaves them near destitution.
We can do something to change it.
Tens of thousands of Canadians participated in some form of lobby group or demonstration over the last year because of our pension system. These public actions are opening the eyes of politicians to the need for serious pension reform. Indeed, how to tackle the pension issue was an item on the agenda at a December meeting of federal and provincial finance ministers in Whitehorse. Since then the issue continues to gain momentum, including the call for changes to the CPP.
Federal Finance Minister Jim Flaherty recently announced the government will conduct three public pension consultations and three expert roundtable discussions with invited guests. The consultations are taking place in Charlottetown, Quebec City and Richmond, BC and there will be roundtables in St. John’s, Nfld.; Winnipeg; and London, Ont.
The CAW will present at the roundtable discussion in London, and has joined with the Canadian Labour Congress to urge that the CPP be doubled. Unlike other private plans, the CPP has proven itself to be a safe, efficient retirement savings plan. It’s portable, keeps up with inflation, and it includes contributions from both employers and workers. The doubling should take place by small increments over the next seven to 10 years.