Canada Pension Plan improvements within reach

Strong momentum is building again to expand the Canada Pension Plan.

CUPE and the Canadian Labour Congress have been at the forefront campaigning to improve the CPP and the Quebec Pension Plan (QPP). Now premiers from most provinces are also pushing the federal government to improve the CPP.

The CPP provides a secure, defined pension indexed to inflation for virtually all Canadians. However, its maximum annual benefits—$12,150 in 2013—aren’t enough to ensure decent retirement income when combined with basic Old Age Security (OAS)—$6,600 a year—and the Guaranteed Income Supplement (GIS) for low income seniors.

CPP benefits

Even the maximum benefit from all three programs ($21,000 total) isn’t enough to keep most above the poverty line. Meanwhile, just a third of Canada’s workforce has a workplace pension plan and fewer than a quarter of Canadians contributed to an RRSP.

A recent report from the Organisation for Economic Co-operation and Development noted that Canada has a modest public system compared to many countries, and relies heavily on private plans. If our private plans are under attack, and some governments oppose CPP expansion, how will we afford retirement?

The CLC’s plan to improve the CPP is straightforward; they propose doubling the replacement rate to 50 per cent, bringing maximum annual CPP benefits to $24,300 for an individual. Together with OAS and an improved GIS for low incomes, this boost would provide decent income and keep seniors out of poverty.

Other proposals to improve the CPP also have merit.  However, none provide the level of benefits that the CLC plan does for lower and middle-income Canadians. Other proposals would primarily target middle and higher income earners. Under all these plans, increased benefits would be pre-funded through gradual and affordable premium increases. The following chart illustrates how different proposals stack up in terms of benefits for different average earnings.

With the demonstrated failure of voluntary pension plans, like the federal government’s private pooled pension plan proposals, and previous opponents now coming around to supporting expansion of the CPP, the tide is turning on this important issue. It’s time to take the final steps and make it happen.

“It is now time for the federal government to quit the delays, show the leadership we need and expand the CPP. We can and must do better for the 11 million Canadians without a workplace pensions and for generations to come.”

Paul Moist,  Home Stretch to expanding CPP November 14, 2013.

With files from Chris Roberts, CLC and Mark Janson, CUPE Research.

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