Posted: Tuesday, 13 December 2011
OTTAWA – A group of leading experts on pension reform in Canada is urging Canada’s finance ministers to commit to expanding the Canada Pension Plan as the best means available to provide retirement security for Canadians.
“We urge the finance ministers to expand the Canada Pension Plan,” the group says in an open letter released just days before the federal, provincial and territorial finance ministers meet in Victoria on December 18-19. “The CPP offers an already existing administrative structure and framework to improve retirement benefits for working Canadians at relatively low cost.”
The six pension experts who have signed the letter are: Bob Baldwin, Bernard Dussault, Keith Horner, Jonathan Rhys Kesselman, Monica Townson and Michael Wolfson.
Bernard Dussault is the former chief actuary of the Canada Pension Plan. Bob Baldwin was an expert adviser for the Ontario Expert Commission on Pensions. Keith Horner is a pensions consultant and a federal former Finance Department official. Jonathan Rhys Kesselman holds the Canada Research Chair in Public Finance at Simon Fraser University. Monica Townson is an economic consultant working in the field of social policy and served on the Pension Commission of Ontario. Michael Wolfson is the Canada Research Chair in Population Health Modelling/Populomics at the University of Ottawa.
The six experts warn that, “A growing body of research indicates that many Canadians likely have inadequate savings to maintain standards of living in retirement.” They say that “prompt action is warranted” and add that “it is important that improvements be agreed to on a timely basis, as an extended phase-in period will be required.”
The Canadian Labour Congress had its own plan for retirement security. It can be found here on our website.
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To the Federal, Provincial and Territorial Ministers of Finance:
A growing body of research indicates that many Canadians likely have inadequate savings to maintain standards of living in retirement. Several recent studies project that a significant proportion of middle-income earners risk a nontrivial reduction in their living standards upon retirement.
The vast majority of employed and self-employed Canadians already contribute to the Canada Pension Plan (CPP). The CPP is fully portable and provides a relatively predictable, inflation-indexed, lifetime retirement benefit to millions of Canadians. The CPP enjoys low costs due to its large scale, efficient administration and professional governance, and the Canada Pension Plan Investment Board oversees a diversified and professionally managed fund on behalf of the plan.
The CPP is limited to replacing 25% of average lifetime employment earnings, contributing to the fact that Canada’s publicly administered pensions provide average and above-average income earners with a gross income replacement rate significantly below the OECD average. The average monthly retirement benefit paid by CPP in June 2011 was approximately $510; even receiving the maximum CPP retirement benefit, a single individual in retirement with no other income (beyond Old Age Security) falls well below the income level cutoff for the Guaranteed Income Supplement (GIS), an income-tested program targeting low-income seniors.
We urge the finance ministers to expand the Canada Pension Plan. The CPP offers an already existing administrative structure and framework to improve retirement benefits for working Canadians at relatively low cost. The changes made to the CPP in 1997–1998 demonstrate that contribution rate increases need not lead to employment losses. Prompt action is warranted; should enhancements to the CPP be fully-funded, it is important that improvements be agreed to on a timely basis, as an extended phase-in period will be required.
Jonathan Rhys Kesselman