Canadians Want Expanded CPP

Bill Curry of the Globe and Mail reports, Majority backs expanding Canada Pension Plan, poll finds (HT: Bernard Dussault):

Proposals to expand the Canada Pension Plan are far more popular than the latest government plans for a new private-sector option, according to a new Environics survey conducted for the Canadian Union of Public Employees.

Federal Finance Minister Jim Flaherty originally supported the idea of increasing premiums over time to pay for higher CPP benefits, however he announced in December he did not have enough provincial support to move ahead.

Instead, Mr. Flaherty secured the provinces’ support for a new pooled pension plan that would be managed by private-sector firms. Talks are currently underway to negotiate the details.

Public sector unions, including CUPE and the Canadian Labour Congress, oppose the new plan and prefer an expanded CPP.

According to the survey, 76 per cent of respondents support increasing CPP benefits and 51 per cent oppose the current federal approach to delay CPP reform in favour of a private pooled pension plan.

The survey also found 81 per cent of respondents agreed it is important that retirement security be debated in the next federal election.

NDP Leader Jack Layton has included enhanced CPP benefits among a list of NDP demands for the federal budget in March.

The survey of 1,001 Canadians was conducted between Jan. 6 and Jan. 11. It has an error margin of plus/minus 3.2 per cent, 19 out of 20.

The results of this poll do not surprise me. There is pension angst among Canadians who are realizing that their retirement dreams are slipping further and further way. And as more and more companies scrap defined-benefit plans to replace them with defined-contribution plans -- effectively placing the retirement onus entirely on individuals -- pension poverty will only get worse.

And pension poverty isn't just a Canadian problem. In the UK the BBC reports, Pensions timebomb to be studied by Lord John McFall:

Many young people are facing a "long retirement spent in poverty", according to the head of a new review into private sector pensions.

Lord McFall, the former chairman of the Treasury Committee, has been commissioned to investigate the state of the sector by the National Association of Pension Funds (NAPF).

The review comes after a NAPF poll found 55% of workers believe they have insufficient retirement savings.

The report will be finished in October.


The pensions landscape has been changing as people in the UK are living longer, and many occupational pension schemes have become less generous.

With families feeling the financial squeeze, pensions have dropped down the list of priorities for some workers, the poll suggests.

Some 43% of those asked said that they could not afford to save for retirement.

Lord McFall's review will be funded by, but independent of, the NAPF. He said that this was a particular issue for young workers who were already facing a burden of debt.

And this was despite changes, being introduced in 2012, that will see workers automatically enrolled into a pension scheme, unless they earn a very low wage or opt out themselves.

"Half the workforce in on a collision course with a long retirement spent in poverty," Lord McFall said, adding it was "unacceptable that so many will head into old age worried about how they're going to get by".

"Even with auto-enrolment, up to nine million people risk being left behind, and we have to make it easier for everyone to save more," he said.

"We will look at different types of pension and savings products, tax incentives, and the regulations faced by employers."


The government's coalition document pledged to "reinvigorate occupational pensions". The NAPF estimated that 19 million people out of the total workforce of 28 million were in the private sector.

Lord McFall said he wanted the review, called the Workplace Retirement Income Commission, to provide evidence that would inform the government's policy, as well as the increase employers' understanding of pensions and educate workers.

He said it would also study how to reestablish "trust and confidence" in the workplace pensions system.

He agreed with the results of the poll of more than 4,000 people, which found that 79% of those asked said the UK required a simpler pensions system.

When I think of the magnitude of the pension problem, I can't help but shake my head listening to shortsighted proposals based on "private sector" solutions. There is a role for the private sector, but if we think banks, insurance companies and mutual funds will make a difference, we're dreaming in technicolor.

I said it before and I'll say it again. Canada has some of the best public defined-benefit plans in the world. We also have excellent private defined-benefit plans (HOOPP comes to mind as the plan that performed best during the 2008 crisis). So why aren't we building on these defined-benefit plans and introduce more competition from the private sector to help manage the funds? Why are we placing a band-aid on the pension tumor? It really is a malignant tumor and no matter how well markets perform this year or in subsequent years, it's only a matter of time before it comes back to haunt us.

Canadians have voiced their opinion. They're worried about their retirement and rightfully so. They're expected to manage their own investments in schizoid wolf markets that are battering professional money managers. I think it's high time Canadian politicians offer Canadians a fraction of the same perks that they're entitled to, namely, a safe and secure defined-benefit plan invested in both public and private markets. The time for expanding CPP has come and we should think hard about how we're going to include the private sector and who's going to manage the money (I'm in favor of several large public funds, not one big mammoth fund). If we squander another opportunity to properly reform CPP, a whole generation of Canadians will fall through the cracks and suffer the indignity of pension poverty.