Presented by Barbara Byers on Wednesday, 19 January 2011

Greetings Sisters and Brothers!

I have a morality tale for you today. It’s all about how a plan that would benefit all Canadians is in danger of being hijacked so that the financial services sector can line its pockets with your money. They are doing this with a little help from their friends in high places. Here is what is happening:

We have a retirement security crisis staring us in the face in Canada.

Sixty per cent of workers have no workplace pension. One-third of Canadians between the ages of 24 and 64 have no personal retirement savings. More than a third of all seniors receiving Guaranteed Income Supplement (GIS), 1.6 million, have annual incomes under $16,000.00 a year. After a life time of work they are living in poverty.

The financial services industry tells us that have the solutions to these problems – just turn more of our money over to them and they will invest it for our retirement.

Well, RRSPs have been a failure. Even some senior bankers admit it [Don Drummond, former chief economist of TD Bank – The Globe And Mail
Wed May 6 2009].

Only one in four taxpayers put any money into an RRSP in 2008. This inadequacy is highlighted by the fact that the average monthly income for those with RRSP savings is just $250.00 a month. It’s a plan where the rich are the ones who can afford to invest to the maximum and get the tax breaks.

And Canada’s financial services sector charges the highest rates in the world to manage those retirement savings.

Our researchers at the CLC have crunched the numbers. They find that management fees can eat up more than 50 per cent of the money that we invest in RRSPs. (Check it out on our CLC website).

And the industry gets their fees off the top, even when we have market meltdowns as we had in 2008-2009.

For more than a year now, the labour movement has driven a campaign calling for a gradual doubling of
Canada and Quebec Pension Plan benefits as the best way to provide retirement security for all.

A modest increase in CPP contributions would produce thousands of dollars a year in extra benefits for workers when they retire.

It was the labour movement, through a campaign of relentless advocacy, that moved this issue to the centre of the public agenda.

Many of you may have been involved. Our partners in this campaign were groups of retirees and other citizens, including students.

Canada’s finance minsters had their officials look at the options and when the ministers met at a meeting in Prince Edward Island in June 2010, they agreed that an enhanced CPP was the best way to go. Two- thirds of the provinces representing two-thirds of the Canadian population had to be on side for the plan to go ahead.

Most of the provinces did seem to be on side, with the notable exception of Alberta, which was opposed to improving the CPP.

Quebec was a bit of question mark.

The finance ministers agreed to meet again just before Christmas in Kananaskis to talk further.

Our polling showed that the Canadian public was firmly on side. In an October 2010 Environics poll, 78 per cent of respondents supported increasing CPP benefits.

This appeared to be a great victory for labour and the public good.

But not so fast. Just before the meeting in Kananaskis, Finance Minister Flaherty came out of the blue to say that he preferred a private sector solution for pensions and he put the CPP improvements onto the back burner.

What was his big idea? Something called Pooled Registered Pension Plans, or (PRPPs).

They are glorified RRSPs – except that they are offered to groups of workers by companies that do not have pension plans. The PRPPs would be administered by the financial services industry.

What’s wrong with them? Well, they have all of the faults and risks of RRSPs and none of the guarantees of the Canada Pension Plan. For one thing, employers do not have to offer the plans. They can opt out.

The employees can opt out as well.

So PRPPs are not a pension plan in the way that any of us understand pensions – that is, where both employers and employees contribute to the plan – the way they do to the CPP.

The PRPP does not offer a defined benefit based on career average earnings; there is no inflation protection; and there is no assurance of full portability.

PRPPs may be a somewhat lower cost than individual RRSPs, because they will be larger and pooled plans. But the financial services sector will still charge relatively high management fees for investing your money. Who is going to stop them?

So PRPPs are, at best, a very poor alternative to expanding the CPP.

One of Canada’s most recognized experts on pensions is Professor Jon Kesselman at Simon Fraser University. He published a column in the Vancouver Sun on January 5, 2011. He says that as a public policy option the CPP wins hands down over PRPPs. Here is a quote from his column:

“It would be unfortunate if misconceptions about enlarged CPP benefits were allowed to impede the reform. Expanding the CPP is the best option for improving Canadian workers' retirement income security; it can ensure essential results that the proposed Pooled Registered Pension Plan cannot achieve."

So why did Jim Flaherty change his mind about enhancing the CPP? We think that lobbyists from the banks and the life insurance companies got to him. Our sources tell us that the industry was lobbying madly in the lead up to the finance ministers meeting in December.

I can tell you that the CLC has filed an Access to Information Request with the federal government to find out just who was lobbying whom between June and December 2010 – the period of time in which Jim Flaherty did his about face.

The finance ministers are going to meet again in June. We have to approach every MP and every MLA in this country and tell them to do the right thing for Canadians. They have to give priority to enhancing the Canada and Quebec Pension Plans.

There are going to be several provincial elections in Canada this year, and there may be a federal election. We are going to make pensions an election issue.

We have to let everyone running for office know that we expect them to support improvements to the CPP. This is a defining issue.

It's high time to ensure that all Canadians for generations to come can retire with dignity and security.

The labour movement helped to win medicare on behalf of all Canadians and we will help to win pension security on behalf of all Canadians.

Just watch us.