Pension promises won’t help today’s seniors
Changes would be of no benefit to today’s seniors
In this federal election, all three major parties have something to say about the Canada Pension Plan and Old Age Security payments, but don’t be fooled. Their ideas have no value to seniors of today.
The NDP and the Liberals want to increase CPP contributions and enhance payments, but that’s not going to help people who are retired or nearing that stage. The CPP can’t afford to start paying more to everyone without destabilizing the fund or putting massive new costs on those still working. It will be decades before enhanced CPP benefits provide real retirement help.
The Conservatives have said they will consider some way to let people voluntarily contribute more to the CPP, but the idea is a vague notion, at best. The Conservatives’ do-nothing approach would have been more defensible if they had not already weakened a perfectly adequate government retirement system.
The Conservatives left themselves vulnerable with their ill-thought-out increase to the age of OAS eligibility, boosted to 67 from the current 65. Even though the Parliamentary Budget Office said the change was not needed to ensure the future financial health of the federal government, the Conservatives did it anyway and never offered a compelling rationale as to why.
The Conservative change will affect the working poor the most. Middle-class people will still retire with or without the OAS. Lower income people won’t be able to afford it.
On the day the Conservatives made their OAS blunder, it was predictable that the other
The best question to ask is: what’s the big problem all of this is trying to solve?
parties would reverse it, and that’s their plan. Since the change doesn’t begin until 2023, the promise costs nothing now.
While the parties are talking pensions, it’s hard to see the target audience. Today’s seniors won’t benefit. The middle-aged will get limited pension improvement. The young will benefit most, but surely pensions are not their top issue. “Vote for me now and I will take your money and give it back in 35 years,” is hardly a compelling election pitch.
The best question to ask is: what’s the big problem all of this is trying to solve?
Consultancy company McKinsey did a major survey of Canadians’ retirement preparedness earlier this year and found 83 per cent are in fine shape, thank you very much. And there is no need to worry about low-income earners. A couple with a combined working income of $40,000 or less will be able to maintain their standard of living in retirement through CPP, Old Age Security and the Guaranteed Income Supplement.
In fact, Canada does a good job of making sure retired people don’t have to live in poverty, but those who campaign for CPP expansion talk as if the government pension plan is the only source of income for retirees. At age 65, the OAS provides up to $563 a month. The GIS will pay a low-income person up $765 a month.
The pension problem, once you peel back the rhetoric, is that some higher earners will have less income when they are retired than they do now. Why is that surprising? It has something to do with not having a job. And more to the point, why does it really matter? By the time people retire, they have usually finished with responsibilities like putting kids through school and paying off big mortgages. Their cost of living is lower.
All the focus on retirement income often overlooks the money people have in real estate equity and other savings, as well as the amounts they are likely to inherit. When the baby boomers die off, the money they pass on will keep their kids out of squalor for some time to come.
So what’s in it for the political parties? Mostly, an opportunity to seem like they are doing something for you, even though it’s you and your employer who foot the bill. The bet is that we’re dumb enough not to figure that out.