Ontario’s pension plan
British Columbia is not enthusiastic about a new Ontario push for immediate action to boost Canadians’ public pension income.
“B.C. believes pension reforms should not be undertaken before the economy has recovered from the impacts of the recent recession,” B.C. Finance Department spokesman Jamie Edwardson declared Tuesday.
Ontario Premier Kathleen Wynne, who may face a spring election, has said the Canada Pension Plan’s $12,150 maximum annual benefit is not providing adequate income for Ontario retirees.
In advance of a premiers’ meeting later in November, Wynne has lobbied Finance Minister Jim Flaherty and the premiers from Alberta and Manitoba, urging a CPP enhancement.
Ontario’s premier is even musing about creating a provincial pension plan to supple- ment the CPP if she can’t get joint action from Ottawa and other premiers.
At present, CPP has a maximum insurable earnings cutoff of $51,000. Prince Edward Island is urging that be doubled, to $102,000, with a concomitant doubling of annual premiums for higher income earners, from about $2,300 to $4,700. You might think B.C. Premier Christy Clark would be leading the pension charge, instead of Ontario and P.E.I. With sky-high living costs in Vancouver and the largest percentage of seniors west of Quebec, B.C. has reason to fret about seniors retiring without sufficient income. And it is fretting, sort of. Says Edwardson: “B.C. has consistently called for comprehensive pension reforms that support Canadians as they prepare for retirement.” And “we look forward to further discussions with provinces, territories and the federal government.”
But B.C.’s premier remains noncommital on early action, despite the province’s status as a retirement haven.
Some 16 per cent of Brit- ish Columbians are now 65 or older and, by 2036, nearly a quarter of the population will be seniors. New Westminster consumer debt consultant Brian Pybus argues on his blog that B.C. retirees are particularly financially vulnerable. B.C. residents have the highest per capita non-mortgage debt load in Canada, at $39,000, a Trans-Union study revealed last June. Some 59 per cent of B.C. retirees are carrying debt, according to a Canadian Imperial Bank of Commerce report. An August 2012 survey by CIBC found 42 per cent of British Columbians in their 50s report having saved less than $100,000 for retirement.
The province has a high cost of living because of big-ticket housing prices in and around Vancouver, where most people live. A Royal Bank report recently described Vancouver’s house prices as continuing “a highly caffeinated trend. “Further exacerbating the situation, like elsewhere in Canada, fewer and fewer workers have access to company pensions or available cash to take advantage of Registered Retirement Savings Plans and tax-free sav- ings accounts. And, of course, interest rates these days are providing crummy returns on investment.
While everyone might agree that it takes considerable creativity to live on Canada’s public pension system, most also would concur that higher CPP premiums could harm an already tepid economy.
Because of that, Flaherty has not been able to reach a provincial consensus on reforming the CPP. Instead he has promoted a voluntary registered pooled pension plan that does not force employers to contribute.
The fact is, comprehensive government action on this front is required now.
And chances are that higher income workers would willingly pay more in CPP premiums in order to achieve more realistic retirement incomes.
Governments should act on P.E.I.’s proposal to double the CPP’s maximum-insurable incomes cutoff, with a temporary delay on requiring employers to contribute until clearly specified targets on unemployment and GDP growth are realized.