Saturday, November 19, 2011

Pension Shell Game

Tom Walkom writes that the only real pension is a defined benefit pension -- the kind of pension which allows you to know how much you will receive in retirement -- like the Canada Pension Plan. For the past thirty years, private pensions have been disappearing, through company bankruptcies. Or they have been replaced by what Walkom calls bogus pensions -- defined contribution plans,  where workers know how much they contribute, but they have no idea  how much money they will receive when they retire.

Last week the Harper government introduced a new "pooled pension" scheme. These pools of capital are essentially group RRSP's, which -- like all RRSP's -- are voluntary retirement plans. It all sounds very wise. But, as is the case with so much of this government's legislation, more is less. Walkom writes:

And the best real pension plan going is the CPP. It is solvent, big enough to remain that way and relatively cheap to operate.

It is also compulsory, which prevents free riders — either employees or their bosses — from gaming the system.

Certainly, an expansion of the CPP is the best way to deal with the 60 per cent of workers — particularly younger workers in non-union shops — who have no other pension plan.

It doesn’t rely on the good intentions of employers (which appeals to labour unions). And by taking the strain from programs like Old Age Security, it saves taxpayers money — which appeals to fiscal conservatives.

And, until Quebec and Alberta sabotaged Jim Flaherty's plan to beef up the Canada Pension Plan, it looked like Canadians could count on real pensions. Now the government has presented a plan that will do nothing for those close to retirement; and it will offer no security to the young, who -- for that reason -- will probably opt out of it. The only people who will benefit from the new proposal are those who work for financial institutions, which will administer it. Remember, this government is pathologically adverse to government involvement in anything -- with the exception of defense.

If the government is intent on implementing an opt out provision, I suggest it let Quebec and Alberta opt out of an expanded CPP. I suspect that the residents of those provinces -- when they see what is happening -- will clamour to get on board the train before it is too late.

That's the best way to put an end to the pension shell game.


Tossing Pebbles in the Stream said...

Surely it is the wrong time to be asking Canadians to trust bankers and stock market gamblers with our retirement funds! Since when was it a functions of government to deliver citizen's money to these people who are proved themselves to be untrustworthy.

Owen Gray said...

The plan tells you a great deal about this government's constituents, Philip.

What's amazing is that the economic meltdown has not affected their thinking a bit.

ck said...

" I suggest it let Quebec and Alberta opt out of an expanded CPP"

We opted out of the CPP a long time ago. We replaced that with the QPP (RRQ). Probably why our lovely finance minister, Raymond Bachand (who I'm not thrilled with these days) voted against. Although, I honestly don't see why he would care one way or the other, given our own pension plan.

Didn't Saskatchewan also vote against? I also believe they too, have their own pension plan.

Owen Gray said...

I guess that's what they call "asymmetrical federalism," ck.

It's getting hard to get people to pull together on anything these days.

Anonymous said...

Great post. I had no idea that canada pension plans were such a hectic topic. I agree with owen that its getting hard for people to pull together and yet there is so many issues for which people need to unite.

Owen Gray said...

There was a time, Shawn, when people agreed that there were somethings in life which required people to pull together. A national pension plan was one of them.

But in the Age of Rampant Individualism, it's every man and woman for him or herself.