The story we published yesterday regarding the outcomes of Tuesday night’s parliamentary “take note” debate on pension reform—Parties joust over pension reform in “take note” debate—generated a lot of buzz from readers.
Here are what some of our readers had to say.
“Unfortunately, the manufacturing base is eroding quickly and the vast majority of well paid jobs are government [jobs]—teachers, firefighters and police—that all have very generous pension plans that are fully funded by the taxpayer. All these plans will eventually put Canada in the hole as they are all too expensive to maintain and there will be no one left to pay the taxes that are required to keep these plans going.” – Roseanne MacDonald, Gates Corp., Ontario.
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“[Judy Sgro] wants all workers to be able to contribution to a DB plan, regardless of employment status. While her intentions are noble, I think Ms. Sgro is missing a key point—the ability to contribute to retirement savings for many Canadians is limited by the amount of disposable income they earn. If she investigates a bit further, I’m sure she’ll find that of the quoted 200,000 seniors currently living in poverty, many were living very close to the poverty line when they were actively working. As result, they likely did not own a dwelling that was paid off and therefore still need to pay rent or mortgage out of their greatly reduced income. Affordable, suitable housing for seniors is a scarce commodity in most parts of the country.
“What earthly good would removing the limits on retirement investing have done for these folks? If a person’s annual earnings are $20,000 or less, is it reasonable to expect them to be able to spare $3,600 (18%) for an RRSP? And at that income level, there is no tax advantage in doing so. If Ms. Sgro’s concern is keeping Canadian seniors out of poverty, her focus needs to shift the barriers faced by today’s working poor. It would really help put this subject in perspective to know what percentage of Canadian families regularly set aside their annual RRSP maximum, broken down by income bracket. I think Ms. Sgro would find the bottom slots are virtually empty.” – Jeannie McQuaid, Belshield Corporate Group Ltd., Ontario.
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“Revise the existing CCP payout/benefit design with a simple mandatory deposit of 4.95% of employee earnings plus an additional 4.95% contribution from the employer. CPP is currently collecting 9.9% of payroll, so no increase in premiums would be required. Each individual’s deposits and account balance would be based on their actual deposited amounts plus investment growth. CPP would collect deposits for each citizen and invest this money on their behalf and maintain a record of the balance in each citizen’s account. Deposits would start at age 18 and deposits plus growth could not be withdrawn until retirement. A person could retire between age 60 and 70.
“Assuming a citizen earns $47,200 a year, works from age 25 to age 65, 9.9% of all earnings are deposited into his/her account, similar to what is currently being collected. A rate of return on investment of 7% would result in a deposit balance of $932,855 at age 65. This citizen could then be paid a pension of $75,175 a year until age 95, assuming a rate of return of 7%. Or an annuity could be purchased that pays till death. If this citizen were to pass away before or after retirement, the balance in his account would be paid to his/her estate.
“CPP currently pays a retirement pension of $11,208 a year. Where is this difference in funds currently going? Help me understand how 10% of earnings paid over 40 years only results in paying such a small pension at retirement?” – Chris Morris, Morris Financial Services Ltd., Calgary, Alberta
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“I belong to a DB pension plan that was part of my compensation while employed. I decided to fund my DB pension rather than consume so I could retire early and enjoy my senior years. Now the paper industry is in financial difficulty and companies have sought CCAA and bankruptcy protection while their pension funds plans are underfunded. I do not understand why the federal government refuses to give underfunded pension plans a priority when a company seeks CCAA or bankruptcy protection while its pension plan is underfunded. We thought we had invested in security and are now shocked that underfunding in pensions is considered an unsecured debt! Why worry about all the new pension gadgets when you are unwilling to correct the plans that are currently in place?” – Bill Sharkey, Catalyst TimberWest Retired Salaried Employees Association, British Columbia.
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Out of the 293 people (as of 2 p.m. on November 24) who voted in our online poll that accompanied the story, 47% are in favour of an increase to the Canada Pension Plan (CPP) yearly maximum pensionable earnings, only 10% think increasing the CPP eligibility age is a good idea and 24% think a national supplementary plan is the answer to the country’s pension coverage issue. However, 19% of who voted do not think that Canada has a pension crisis.
Admittedly, this poll only outlined some of suggestions that have put forth by various groups but it does shed some light on where the public stands in contrast to what the government is proposing.
Where do you stand on the topic?