OTTAWA – Federal political parties may be quarrelling over how best to expand the Canada Pension Plan, but they seem to agree on one thing: Canadians should be saving more for retirement.
But is that a universally accepted truth?
Researchers are divided, it seems. Some reports suggest most people will actually be just fine when they enter their golden years. Other studies paint a desperate picture of a decidedly downmarket lifestyle.
Regardless of who you believe, though, the debate over retirement savings is shaping up as a major ballot-box issue for this fall’s election campaign.
That was clear enough earlier this week when Finance Minister Joe Oliver said the government would consider giving people the option to inject more earnings into the Canada Pension Plan — a 180-degree pivot for the Tories on the issue.
“Obviously, we always want Canadians to save more,” Employment Minister Pierre Poilievre said Thursday in Ottawa.
Both the Liberals and the NDP say voluntary expansion of the plan doesn’t go far enough to ensure people are in good financial shape when they retire. They both propose to introduce a mandatory CPP add-on if elected.
The federal Liberals say theirs would look like the one introduced by their provincial cousins in Ontario.
“I think the majority of Canadians agree — certainly the majority of Ontarians showed that in the last (provincial) election — that we need to expand the CPP because Canadians are not saving enough,” said Liberal MP John McCallum, a former bank economist.
The New Democrats have long supported the idea of a compulsory increase to the pension plan. Some studies, however, suggest Canadians will already be in a decent position by the time they retire.
Oliver cited one of those reports Thursday when he was asked whether he thought Canadians had saved enough for retirement.
The study by the McKinsey and Company consulting firm found that 83 per cent of Canadians were headed for a comfortable retirement, Oliver told a conference call.
“They believe that the retirement system in Canada is very sound.”
Last fall, Canada’s retirement-income system ranked seventh out of 25 countries measured by the Melbourne Mercer Global Pension Index. It grades countries based on elements such as adequacy, sustainability and integrity.
Scott Clausen, a Toronto partner with the Mercer consulting firm, said while Canada ranks well, there are some areas to be worried about.
Fewer and fewer Canadians working in the private sector have had access to retirement plans in recent years — particularly people at middle-income levels, Clausen said.
Meanwhile, Jack Mintz, a tax-policy expert at the University of Calgary, said he has been studying the challenges faced by single seniors.
The poverty rate for seniors is about six per cent, but for single people in that age group it’s 20 per cent, Mintz said. He believes seniors should get 100 per cent of spousal benefits when their partner dies, so they continue to receive the same amount of money as before.
Of course, other research suggests Canadians urgently need to squirrel away more cash.
An August 2013 report by the Bank of Montreal showed that baby boomers were, on average, $400,000 short of their ideal savings goals, even as they reach retirement age.
Another BMO survey released last year found people from the so-called “sandwich generation” — those aged 45 to 64 years old who often find themselves caring for their aging parents as well as their kids — were $560,000 short of their savings targets.
The seniors advocacy group CARP says two-thirds of Canadian workers do not have access to workplace pension plans, while private tools like registered retirement savings plans are inadequate.
The Conservative government has offered scant details about its proposal since announcing this week it would consult stakeholders, including the provinces, about the idea.
Oliver acknowledged that in 2010 his predecessor Jim Flaherty flatly rejected the idea of a voluntary CPP increase.
“Mr. Flaherty was concerned about the administration of a voluntary CPP,” Oliver said. “We now believe it is workable.”
He declined to elaborate, other than to say it would provide a new, flexible savings choice for Canadians.
Rivals have said they doubt the Tories will ever follow through on CPP expansion, calling Oliver’s announcement little more than crass political opportunism. Nonsense, the minister responded.
“We’re not going to stop looking at ideas that will benefit Canadians just because an election is coming by.”
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