By

Paul Moist“We think the real retirement security issue in our country is the rapidly declining coverage in the private sector, almost non-existent workplace coverage in the service sector … to the point today that we have 65 per cent of Canadians who went to work this morning, almost 11.5 million of our workforce of almost 18 million, who have no workplace pension plan. And frankly, not much prospect of one.” – Paul Moist


 

By John Devine

As millions of Canadians without adequate pension income knock on retirement’s door, or gaze at it from just around the corner, the pension crisis that awaits has many experts pointing to an established defined benefit plan as the preferred, and perhaps only, solution.
The Canada Pension Plan (CPP) is already universal, mandatory, portable, and a modest expansion could provide Canadians with a more dignified and secure retirement than the one facing those without pensions, say advocates, including Paul Moist, National President of the Canadian Union of Public Employees (CUPE).

“It’s in the national interest that people prepare for retirement. The question for us is, what is a proper vehicle to prepare for retirement? We think it’s a pension plan that’s well structured, has all the administrative capacities in place and has a proven track record. Nothing comes close to the CPP.”

Expanding the CPP to deliver 50 per cent of retirement income, instead of the current 25 per cent, by gradually increasing contribution rates by three per cent over seven years would also tackle the real pension crisis facing Canada, say proponents.
And that’s not the cost of public sector pensions, says Moist.
“We think the real retirement security issue in our country is the rapidly declining coverage in the private sector, almost non-existent workplace coverage in the service sector … to the point today that we have 65 per cent of Canadians who went to work this morning, almost 11.5 million of our workforce of almost 18 million, who have no workplace pension plan. And frankly, not much prospect of one.”
With 600,000 members across Canada, which makes it the largest union in the country, CUPE is an active proponent for adequate retirement income for all Canadians, not just public sector employees. The union, the Canadian Auto Workers (CAW), and the Canadian Labour Congress (CLC), are the prime movers behind the campaign to beef up the CPP.
The retirement crisis is being brought on by the collapse of the traditional three-legged retirement stool: workplace pensions, personal savings and government income supports, including the CPP. With pensions disappearing from the private sector, and personal savings not sufficient for retirement purposes, a significant number of Canadians will have to rely on CPP benefits, which are insufficient, according to Moist and other advocates of expanding the CPP.
Former CPP chief actuary Bernard Dussault is among the chorus of voices calling for the national pension plan to be expanded. For an ARIA exclusive with him, click here.
As currently operated, the CPP is not an overly generous plan, says Moist. It wasn’t set up to be one, with financial interests arguing at the plan’s onset it didn’t need to be a dominant part of the retirement puzzle, as the other two legs of the retirement stool – occupational plans and personal savings – would provide the bulk of retirement income.
With the subsequent collapse of pensions in the private sector and savings-type plans like defined contribution now shown to be an ineffective method of accumulating retirement income, the third leg – the CPP – has become more important than ever, says Moist, who adds that Canadians shouldn’t wait for pensions to come back to private sector workplaces.

“The (pension) leg of the stool is not going to materialize, in our view, from the private sector. Even in the unionized, large manufacturer private sector, there is pressure on DB plans and they are being eliminated. So, the retirement security discussion for Canadians has been focused on a modest expansion of the CPP.”

There exists substantial governmental support for this approach at the provincial level, but not with the federal government, says Moist. The feds have introduced their own retirement plan, the Pooled Registered Pension Plan (PRPP). Critics, including Moist, say the PRPP is a poor vehicle for accumulating retirement income.
“The model is flawed in a fundamental way – in plain English, there’s no skin in the game for employers.”
In a traditional pension scheme, and in some DC models, employers contribute to an employee’s pension pot, and those contributions are mandatory. As currently constituted, the PRPP doesn’t mandate an employer’s participation or require any type of contributions. Employees can also opt out of the plan, which requires provincial assent to become active.
To date, no province has moved on the plan. Quebec had introduced legislation to enact its own version of the PRPP, but that died when the election was called.

“The PRPP is destined to fail. In structure it’s the same as a plan that was introduced as an idea in the last Trudeau budget in 1984, which isn’t written about very much because it never got off the ground … it’s so badly flawed structurally that it’s counter-productive if the end game is retirement security options for Canadians.”

Moist and others are calling on the federal government to convene a national retirement security summit to address Canadians’ growing retirement insecurities. A political champion for retirement security needs to emerge, to answer a basic question, says Moist: do we pay now or later?
“We are a society that isn’t going to cast people aside if they don’t have sufficient retirement income. Very inefficiently, we will provide for them in a very imperfect way. It’s far better for people to have a vehicle … to accumulate adequate retirement income.”
Click here for more on CUPE’s approach to retirement issues.

John Devine writes for the Alliance for Retirement Income Adequacy. Read the ARIA blog at ariapensions.ca, and follow ARIA on Twitter.

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