Presented by Hassan Yussuff on Monday, 19 September 2011

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Thank you for inviting me to speak to you.

Thank you for taking the time to hear about this important issue.

And above all, thank you for inviting me during the one week when there is no hurricane threatening Atlantic Canada.

I want to tell you a bit about the Canadian Labour Congress’ campaign to win a secure and adequate retirement for everyone in this country.

But first I want to explain why this provincial election comes at a turning point in Canada.

This election in Newfoundland & Labrador, together with the other provincial and territorial elections occurring this fall, is a watershed moment for Canada.

Let me explain why.

A crisis has been slowly brewing in this country and is now beginning to break into the open.

There is more and more evidence that we have a very serious problem of inadequate retirement savings in this country.

Canada is rapidly growing older.

Newfoundland & Labrador is ageing. Today, there are about 23 seniors for every 100 working-age individuals in Newfoundland & Labrador.

25 short years from now, this will more than double to 58 seniors for every 100 working-age individuals.

In a city like St. John’s, the median age (40.8 years) is already higher than the average for all Canadian cities, and St. John’s is ageing more rapidly than the average.

But the same dramatic changes occurring in Newfoundland & Labrador are happening across the country.

Just as our society is quickly changing, it’s becoming apparent that our retirement income system is unable to meet the challenge.

A large segment of the population approaching retirement in the next 25 years – millions of Canadians – will suffer financial insecurity and inadequate incomes in retirement.

The numbers were crunched by Dr. Keith Horner in July of this year. Horner estimated that half of Canadians born between 1945 and 1970 and earning between $35,000 and $80,000 are facing at least a 25% drop in their post-retirement standard of living.

What happened to Canada’s retirement income system? How did we get to this point?

The basic problem is that two of the three “pillars” of Canada’s retirement income system are failing: workplace pensions, and private retirement saving.

Take workplace pensions first.

Not so long ago, Canadians had an unspoken understanding with employers: Canada’s universal, public earnings-related pension plan, the CPP/QPP, would be limited to covering only 25% of workers’ replacement income.

In exchange, employers would make up the remaining income, providing secure, adequate workplace pensions for employees.

Today, that agreement with employers lies in tatters.

12 million Canadians -- two-thirds of all workers, and three-quarters of workers in the private sector -- have no workplace pension plan. And this number is falling.

Workplace plans now cover only 33% of the labour force. In Newfoundland & Labrador, just 37% of workers were covered by a workplace pension plan last year.

Employers that once offered good defined-benefit plans are shrinking or abandoning them as fast as they can.

In the public sector, municipal governments and Crown corporations like Canada Post are trying to cut benefits and close their defined-benefit plans. I don’t need to tell you about the daily attacks being launched against public-sector pensions.

In the private sector, firms like Air Canada are trying to introduce a defined-contribution plan for new employees.

In Hamilton, US Steel has locked out workers for over a year. Not only is the company trying to close the defined-benefit plan and put all new hires into a defined-contribution plan.

The company also wants to take away inflation-indexing for 9,000 retirees who gave their working lives for Stelco. Shame on them.

Here in Newfoundland & Labrador, Vale Inco sparked a long strike at the Voisey’s Bay nickel mine when it set out to close its defined-benefit plan.

Employers are walking away from their pension obligations and leaving workers to fend for themselves.

So -- how well are workers doing at saving on their own?

Workers are doing the best they can.

But left to their own devices, individuals are unable to sock away enough for an adequate retirement income. Small wonder, since average real wages have barely budged since the late 1970s, and household debt levels have reached 150% of income.

Take RRSPs for example.

RRSPs have failed for 50 years to live up to their promise. Despite costing $7.3 billion in tax subsidies, RRSPs still offer no real benefit for the vast majority of Canadians.

Just look at Newfoundland & Labrador. In this province, over half of seniors’ income in retirement comes from just two sources: OAS and CPP. Another 25% comes from workplace pensions. Guess how much comes from RRSPs: 1.1%.

Only about one-quarter of tax filers contributed to an RRSP in 2009. The typical RRSP contribution took up just 6% of available contribution room.

In 2009, Newfoundland & Labrador taxfilers had $9.2 billion leftover in unused RRSP contribution room.

The dirty little secret about RRSPs is that they really exist only to the benefit of the highest income earners.

In 2009, 11% of Canadian taxfilers reported income over $80,000 a year. That same 11% of taxfilers contributed more to RRSPs than the bottom 89% of Canadian taxfilers combined.

In Newfoundland & Labrador, individuals with $80,000 or more in income make up 8% of all taxfilers, but account for 56% of all contributions to RRSPs.

In other words, the highest-earning 8% of tax filers contribute more to RRSPs than the bottom 92% of income earners put together.

In St. John’s, it’s even more extreme: that 8% of taxfilers accounts for 59% of all RRSP contributions.

RRSPs geared to the richest among us, but they rip off just about everyone.

In March 2011, a study by Morningstar found that Canada has the highest mutual fund fees out of 22 countries surveyed in the report. With $660 billion of Canadians’ retirement savings invested in mutual funds, RRSPs are a scam that pays rich rewards.

To understand just how much money is at stake, consider the following. Say you put $10,000 in a fund with a 5% annual rate of return and a management fee of 0.5%. After 45 years your investment would be worth a little over $72,000, and the management fee would be about $17,800.

Now picture investing that same $10,000 in a fund with a management fee of 2.5% instead of 0.5%. 2.5% is a common fee for a mutual fund.

Instead of receiving $72,000 you would get just $29,500. And instead of paying $18,000 in management fees, your mutual fund company would take over $60,000 of your retirement savings!

Individuals trying to save for retirement are struggling with stagnant incomes and a financial industry that skims off too much of our retirement savings. And employers are throwing their workplace pensions overboard as too expensive or too risky.

As workplace pensions retreat and private retirement savings vehicles leave ordinary Canadians behind, the risk is that more and more Canadians will face financial insecurity in retirement.

This is tragic, because until recently, Canada’s public pensions produced a dramatic drop in the old-age poverty.

Canadian seniors saw a decline in the poverty rate after taxes and transfers from 28.4% in 1973 to 5.4% in 1997. Old-age poverty in Canada today is half the Organisation for Economic Co‑operation and Development’s (OECD) average, a huge achievement.

But public pensions in this country provide a low maximum benefit.

Many seniors live on low incomes just above the poverty line, and economic recession can lead to a spike in old-age poverty. Recently, the number of poor seniors has begun to increase.

There is a significant proportion of seniors living in low income in Newfoundland & Labrador’s cities and rural areas. Seniors living alone (especially women) face a much higher risk of poverty than Newfoundland & Labrador residents as a whole.

In Newfoundland & Labrador, 15.7% of residents lived in low-income in 2009. For unattached individuals aged 65 and over, the figure was 53.5%.

Seniors with low incomes (under $16,200) qualify for a public pension top-up through the GIS. But the total amount falls short of raising them to a decent standard of living. The maximum amount of OAS plus GIS is only $1,257 for a single person, or $15,088 per year.

Newfoundland & Labrador’s Low Income Senior’s Benefit provides another $75 a month.

But added together, the maximum annual benefit for an individual ($15,988) is barely enough to lift a senior over the poverty line in a city the size of St. John’s ($15,865 in 2010).

In June, the federal government added another small monthly top-up of $50 for single seniors and $70 for couples with very low incomes. Seniors’ groups and the labour movement should take credit for this new supplement. We demanded the government take action on old-age poverty.

But the top-up doesn’t go far enough.

It does nothing for the majority of GIS recipients, many of whom live in poverty or financial insecurity. In fact, this federal top-up is less than Newfoundland & Labrador’s own Low Income Senior’s Benefit.

As Canada’s and Newfoundland & Labrador's population grows older, who is going to pay the cost of our inadequate retirement savings?

In the first instance, cities have to meet the needs of seniors living in poverty and near-poverty.

Municipal governments provide a wide range of services to seniors: housing, public transit, senior centres, libraries and cultural and recreation services.

Many municipalities also provide property tax assistance programs, including full or partial tax deferral.

St. John’s has a Senior Citizen’s Property Tax Reduction. Mount Pearl has a Seniors’ Interest Credit and a property tax reduction for seniors. Corner Brook and Conception Bay South both have Senior’s Discounts.

Newfoundland & Labrador taxpayers also pay for provincial programs such as the Low Income Seniors’ Benefit and the 65Plus Plan under the Newfoundland and Labrador Prescription Drug Program providing prescription drug coverage for seniors receiving the GIS.

Without urgent action, cities and the Newfoundland & Labrador government will increasingly bear the brunt of the costs of our ageing population.

If we could ensure that future seniors have better pensions, the pressure on municipal budgets from an ageing population would be greatly reduced.

Friends, we need to start over with the fundamental principle that every single worker in this country deserves a decent and secure income in retirement.

No matter where they work, private or public sector.

That means the right to a defined-benefit pension, the type of plan that corporate executives and politicians make sure they set up for themselves.

Canadians already enjoy a secure, low-cost and fully-portable defined-benefit pension. That’s the Canada Pension Plan.

The CPP/QPP delivers secure, predictable, inflation-indexed retirement benefits for life, at a far lower cost than the fees charged by banks and mutual fund industry. It will continue to do so for the next 75 years and beyond. And best of all, virtually all employed and self-employed Canadians already belong to it -- private and public sector.

The problem is that the retirement benefits the CPP/QPP pays out are set too low to provide an adequate income in retirement.

Expanding the CPP is the lowest-cost way to dramatically increase the security and adequacy of retirement benefits for workers without workplace pensions and those with defined-contribution plans.

The CLC’s plan is to double future CPP benefits by gradually phasing-in an increase in contributions over 7 years. By increasing CPP contributions by just 0.43% of pensionable earnings each year for 7 years, we can achieve a 100% increase in future CPP retirement benefits.

For a worker earning $30,000 per year, the initial cost would be about 6 cents an hour, or $2.27 a week. That’s about the cost of 2 songs downloaded from iTunes. Or for those of you without the latest gadget, it’s less than the cost of a medium double-double with a donut at Tim Hortons.

We’ve crunched the numbers, and the costing behind our plan has been scrutinized and verified by Bernard Dussault, former Chief Actuary of Canada.

Our plan benefits young people retiring 40 years from now, who will fully benefit from a doubling of CPP benefits when they leave work.

Today’s youth are often working at low-wage, insecure jobs, while struggling with growing levels of student debt.

An expanded CPP would give them a more adequate retirement income at far lower cost than they would be able to save on their own.

Without an expanded CPP, young people in the future will face an enormous inter-generational transfer of wealth.

Huge increases in Old Age Security and the Guaranteed Income Supplement will be needed to pay for baby boomers who weren't able to save enough on their own, or who saw their retirement savings depleted amidst the three stock-market crashes of the last 15 years.

Our plan benefits older workers approaching retirement, who would see increases in their retirement benefits.

Our plan benefits workers with no pension plan, but it also benefits workers fighting to defend their workplace pension plans.

An increase in CPP benefits would permit employers and employees to negotiate a reduction in plan contributions and benefits.

It would allow them to shrink any unfunded liabilities that exist in the plan, while reducing the tax expenditures that support workplace pension plans. It would narrow the gap between private and public sectors by lifting the boats of all workers.

The CPP provides a fully portable, secure, inflation‑indexed, defined-benefit pension at a very low cost.

The CLC proposes to phase in a doubling of CPP benefits from 25% to 50% of average earnings on a pre-funded basis. Additional contributions from workers and employers would be invested to pay for higher pensions in the future.

The maximum CPP retirement benefit is currently $960 per month. But this goes only to those who have consistently earned above the average over their entire working life.

That’s why the average monthly CPP retirement benefit in March 2011 was just $510.

Our proposal would increase the average benefit each year, and double the average benefit when fully implemented. In fact, future benefits will be higher since they will be boosted by any increase in real wages in the future.

A 100% increase in future CPP benefits can be financed by raising CPP premiums by only 60% over seven years. It would take approximately 40 years for the new system to be fully mature, but a higher pension credit would be earned in each year following a decision to expand the CPP. Partial benefits would be earned while the premium increase is being phased-in over seven years.

We also want an immediate end to old-age poverty in this country.

Hundreds of thousands of Canadian seniors live in financial insecurity. The GIS helps support 1.7 million low-income seniors. But the average benefit (less than $460 in March 2011) is too low to lift many out of poverty.

Our plan is to boost the incomes of poor seniors through an immediate 15% increase in the GIS.

This would have several benefits. First, it would ensure that no senior, current or future, will ever retire into poverty (since public pensions are adjusted for inflation).

Second, money put into the GIS will be spent locally by seniors for their essential needs. Such direct spending into the local economy represents an important and effective form of economic stimulus at a time when it is badly needed.

Finally, workers who worry about looking after their parents in retirement can rest assured their parents will be able to provide themselves with the basics. This is especially true for workers facing their own retirement years with elderly parents and loved-ones to care for.

The CLC and the labour movement has waged an incredible campaign to put this on the agenda. We launched the Retirement Security for Everyone campaign in September 2009, right in the midst of a financial crisis and economic recession.

At the time, Finance Minister Flaherty said there was no way the government would consider an expanded CPP.

Since then, our campaign has won support from every corner of society. Union members, retirees, community activists have organized townhall meetings and rallies from one end of the country to the other.

In May 2010, mayors and city councillors meeting at the Canadian Federation of Municipalities unanimously endorsed our demands – an incredible statement of support.

From coast to coast, university campuses and student groups like the Canadian Federation of Students passed resolutions in support of our campaign.

Anti-poverty organizations and community coalitions got behind us.

Dozens of academics and pension experts endorsed our proposals.

Even conservative newspapers like the Calgary Herald published editorials in support of CPP expansion.

Union leaders and activists lobbied every single member of Parliament in their constituencies.

Finally, in June 2010, the federal minister and provincial finance ministers premiers indicated they would support an expansion of the CPP.
But the financial industry, insurance companies and groups like the Canadian Federation of Independent Business lobbied hard against us.

They were successful in getting the government to stall CPP expansion. Last December, the government announced that it would push ahead with the financial industry’s model, the Pooled Registered Pension Plans.

These groups opposing CPP expansion favour the PRPP idea because it will be voluntary, and will not require employers to pay a single cent.

But we have very few details on how the PRPP is supposed to work.

The federal government can’t guarantee that savings will be protected against inflation or future market turmoil, and it can’t guarantee that the management fees charged by private sector brokers won’t bleed away future earnings.

In fact, PRPPs are shaping up to look a lot like group RRSPs.

To be sure, for a small fraction of high earners, PRPPs are very attractive.

High income-earners are most likely to max out their RRSP contributions.

Not surprisingly, it is self-employed professionals with high incomes – doctors, lawyers, and certified general accountants – with no access to workplace pension plans who are looking for additional and lower-cost tax-assisted savings vehicles.

The groups opposed to CPP expansion are the same ones that want to free-ride on the public purse.

With no CPP expansion, GIS and Allowance expenditures are projected to climb from $9.2 billion in 2011 to $39.7 billion in 2050, when fully one-third of the senior population will be receiving GIS!

Groups like the CFIB want to deflect attention from this looming tax bill by pointing at supposed gold-plated pensions in the public sector.

Make no mistake, these attacks are aimed directly at women, who now make up half of workplace pension plan members, and who are most likely to be employed in the public sector.

These women are earning decent, but in no way extravagant, pensions. The average public-sector pension in 2009 was about $18,000 a year. Hardly a “gold-plated” pension.

The CFIB likes to paint our plan as a “job-killing payroll tax-hike.” But CPP contributions do not discourage employers from hiring. Beginning in 1997, CPP contributions were nearly doubled over a five-year period, during which the unemployment rate fell from 9.1% to 7.6%, before continuing to fall.

Instead of spending precious government resources trying to sell Canadians on a scheme designed by and for the financial services industry, the federal government should just accept all the evidence it has, listen to the pension experts and expand the Canada Pension Plan as soon as possible.

I want to end by returning to the importance of this election campaign. To achieve an expanded CPP, we need the support of two-thirds of the provinces representing two-thirds of the population.

Friends, I need your help. I urge you to ask your candidates where they stand on the issue of retirement security and CPP expansion, and vote accordingly. And tell your friends and neighbours. I can’t stress the importance of seniors’ activism enough.

Jack Layton was an enthusiastic supporter of CPP expansion, and he put it exactly right: together we will indeed change the world.