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'A secure, enjoyable retirement should be the right earned by workers for decades of contributions to one’s community and Canada’s economy.' - James Clancy.
Ottawa (19 April 2010) - The National Union of Public and General Employees (NUPGE) has presented a submission to the federal finance department on the future of Canada's retirement system, calling for a national Pension Summit this year.
Entitled Ensuring the Ongoing Strength of Canada's Retirement Income System, the brief says the consultations announced by Finance Minister Jim Flaherty are too restrictive because they allow only three meetings that are open to the public and four round table discussions, open only to invited "stakeholders" and online submissions.
"We are disappointed," says NUPGE president James Clancy, who submitted the brief on behalf of his union's 340,000 members across Canada.
"This restrictive consultative process calls into question the federal government’s commitment to seriously address the failings of our pension system which we believe is a major issue for most Canadians. NUPGE is of the view that this important national policy issue deserves a much more public and transparent forum for discussion."
Clancy says the pension system, like all key public programs and services, is an important tie that binds the country together and expresses the commitment of citizens to their mutual well-being and to the principle that everyone has a right to income security and dignity.
"NUPGE, the Canadian Labour Congress (CLC), the government of Ontario, as well as several national organizations, including retiree groups and pension plan sponsors, have been calling for a National Pension Summit to be held later this year," Clancy says.
"A summit could address a range of pension issues, including the steady decline in the number of Canadian workers covered by workplace pension plans. It would provide Canadians from all walks of life with an open forum to fairly explore and assess the viability of all options designed to improve retirement security for all Canadians. Given that opportunity, NUPGE is convinced Canadians will make the right choice."
The brief says the economic crisis over the past 18 months has devastated pensions and retirement savings and this is only part of a much larger issue.
"The bigger crisis, however, is that the vast majority of Canadians don’t have either a workplace pension plan or private savings," Clancy says.
Only 38% of the Canadian labour force, about 5.7 million workers, belong to a pension plan. Close to 10 million Canadian workers do not have a private pension plan. These workers must rely on their own individual savings, through Registered Retirement Savings Plan (RRSP) contributions or other means, for their retirement security.
Clancy outlines a series of measures that NUPGE argues are needed to improve and strengthen the national pension system, including the following:
Increase Guaranteed Income Supplement (GIS) benefits: The brief urges the government to raise GIS benefits by 15% to "lift all seniors out of poverty" immediately. "The costs are minimal," Clancy argues. "Because of the good work already accomplished through the Old Age Security (OAS) and GIS, closing the poverty gap for seniors is not expensive. It is possible to do so immediately through a modest $682 million increase to GIS benefits. This is less than 3% of what is currently spent on tax subsidies for RRSPs. Tax subsidies for RRSPs ($18 billion) now exceed half of what is spent on federal public pensions (OAS/GIS)."
Expand the Canada Pension Plan: "The labour movement has proposed a doubling of the CPP benefits to ensure a better minimum pension for all Canadians. This would be financed through a modest and gradual increase in contributions over seven years, following the pattern set by CPP reforms in the 1990s. Currently workers and employers pay 4.95% of salary into the CPP (up to a current 'Yearly Maximum Pensionable Earnings' limit of $46,300 per year). Following the seven-year plan, CPP contributions would gradually increase to 7.8% of salary for workers and employers. These increased contributions would effectively double the average earnings replaced by CPP pension benefits, to a maximum (in 2010 dollars) of $1,868 per month."
National Pension Insurance System: "Our federal government should create a national system of pension insurance financed by contributions from pension funds themselves. This system would initially apply only for pensions in the federal jurisdiction, but other provinces could also choose to opt in if they wish. As part of this insurance system, the federal government should also create an agency to adopt pension plans abandoned in corporate bankruptcy, to offer affected workers the safety net of a minimum pension in retirement. To help finance large pension insurance claims, the federal government’s proposed national securities regulator should introduce a 0.1% financial transfer tax on Canadian stock markets."
Promote Superior Defined Benefit (DB) Pensions: "Approximately 70% of workers in the public sector are covered by DB plans and about 20% of private sector workers are covered by DB plans. The other 5% of private sector workers who have pension plans belong to a Defined Contribution (DC) plan. For the last several years we have seen a move by some private sector employers to get rid of their DB plans in favour of the inferior DC plans. Moving from a DB to a DC plan transfers the entire risk of inadequate retirement income from the employer to the employee. That’s why employers are pushing this trend. The federal government should consider creating incentives through our tax system that encourage employers to have DB plans."
Better regulation of Canada’s private retirement savings system: "Irresponsible financial decisions made by many institutional investors without any serious government oversight or transparency has had devastating consequences for Canadian retirees and those who are about to retire. The most vulnerable are those Canadians who invested directly in the markets, in equities, mutual funds, and other financial instruments. Most of those Canadians who contribute to a DC pension plan or an RRSP are in this situation.... Federal and provincial legislators need to strengthen the regulatory system governing banks and other financial institutions that are responsible for managing the retirement savings of millions of Canadians."
Clancy said Canadian leaders must end the "fend for yourself" approach to retirement security that currently prevails in Canada.
"It’s not acceptable for the federal government to continue to offload our collective responsibility onto individual workers for their financial security in retirement. This ultimately will lead to having more and more working Canadians living in poverty in their retirement years and will place increased pressure on our public pension system. A secure, enjoyable retirement should be the right earned by workers for decades of contributions to one’s community and Canada’s economy," Clancy said.
NUPGE
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE
More information:
• Ensuring the Ongoing Strength of Canada's Retirement Income System
• National Pensions Summit needed to explore all retirement security options
• Join the CLC campaign - Retirement Security for Everyone
• NUPGE launches radio ad campaign calling for national summit on pensions