They don't quite agree on the solution, but experts agree that throwing money at seniors isn't the answer to Canada's pension problem.
All the federal parties have talked about pension reform in recent weeks. The Conservatives have proposed a $300-million top-up payment for recipients of the Guaranteed Income Supplement (GIS), for example, while the NDP and Liberals have proposed a $700 million top-up. Each has also floated plans to reform the Canadian Pension Plan (CPP).
What's the problem?
The pension problem is pretty simple — we're not saving enough for retirement.
Only 38 per cent of Canadians have a workplace pension, according to the Canadian Centre for Policy Alternatives (CCPA), and just 31 per cent contribute to RRSPs. As a result, about two-thirds of Canadians planning to retire in 2030 will not have enough money to cover their expenses, according to the Canadian Institute of Actuaries.
A retiree without a workplace pension or RRSP would have to rely on the GIS, CPP, Old Age Security (OAS) and the Alberta seniors' benefit to survive retirement, says Gary Pool, president of the Alberta Council on Aging and a Morinville resident. Those programs will get you a mere $1,500 to $2,000 a month, barely enough to pay for a basic seniors' lodge.
It's often worse if you work part-time, he continues, or hop from job to job. Unless your pension is portable, you'll end up with a bunch of small lump-sum payments from each company's pension plan, each with different rules. "You almost need a financial manager to deal with it."
Some solutions
The pension solution is simple, on the face of it: get those 70-odd per cent of Canadians who don't have a workplace pension plan to save more money.
But many people simply don't have the money to save, found the Senate Committee on Banking, Trade and Commerce in a recent report. They're too busy paying down mortgages or putting kids through school. Others make too little money for saving to be worth it — you lose GIS and OAS payments if your income is too high.
Those who do save through RRSPs often fall prey to management fees, says Susan Eng, vice president of advocacy for the Canadian Association of Retired Persons, most of which run at about 2.5 per cent. "You could lose half of your savings to those fees."
Experts have called for various national, pooled pension plans that would encourage more savings while reducing management costs. All these proposals require provincial buy-in because the provinces regulate most workplace pensions.
The Conservatives have pitched voluntary pooled pension plans that would act as big private-sector RRSPs, Eng notes, while the Liberals have proposed a single voluntary, government-run side-program to the CPP. The NDP has called for a doubling of CPP payouts, which would mean higher mandatory CPP contributions.
Any one of these plans would be better than what we have now, Eng says, as they are low risk, low cost and open to everyone. "The benchmark you have to meet is not letting anyone live in poverty in retirement."
Her group favours a universal pension plan that would be mandatory, low-cost, and run at arm's-length from the government. Keith Ambachtsheer, Director of the Rotman International Centre for Pension Management and contributor to the C.D. Howe Institute, prefers a plan with an opt-out clause and automatic enrolment. That way, he argues, you get the greatest number of people possible covered while still leaving an out for people with adequate workplace pensions or no extra money to save.
Pool says he'd like to see someone bring in a seniors' advocate. His office fields two to three calls a week from people confused about pensions, and an advocate could help them figure out how to get the benefits they deserve.
The one element experts agree on is the need for pension reform. "Unless they go in and improve the pension system," Pool says, "they're just throwing money at it."
