Canada, like the U.S., has a federally-administered old age security program. In Canada, its main component is called the Canada Pension Plan (CPP). It kicks in at 67, although the current Liberal government has indicated that it will reverse that to its former 65 start. There are also two other components — Old Age Security and the Income Supplement — the former for everyone based on income and the latter for those whose income in old age is very low. Now the federal government, with the agreement of the majority of provinces, wants to increase the contributions made by employers and their employees to the CPP. This is the result of a number of factors including:
- Currently, the level of household debt to income in Canada is at its highest in recent history, combined with very low savings rates;
- Individuals are not putting sufficient personal savings aside to ensure a comfortable retirement, including into Registered Retirement Savings Plans similar to 401Ks in the States;
- Many seniors are compelled due to finances to continue working beyond 65, some well into their seventies and even eighties;
- Only one-third of working Canadians have a private pension plan with their employers, especially defined-benefit plans; and
- With an aging population there are already stressors on the public old age security reserves, with possible future increases in liabilities.
The proposed increase in CPP contributions has met with opposition from some interest groups, including those representing small businesses. The main argument is that the increase in employer contributions and associated costs will discourage additional hiring and result in job losses. Employees may view additional contributions as a form of more payroll taxes, although they will benefit in the future when increased CPP payments are made to contributors.
What both sides really miss in their opposition is the fact that the costs associated with retirements, especially for those on fixed incomes, are increasing on a yearly basis. Anyone familiar with the costs related to providing housing, health care, personal support care, etc., etc., knows what I mean. As a senior, try living in one’s home, in a senior’s residence or in a long-term care facility! Indexing retirement payouts to annual inflation rates doesn’t even make a dent in meeting such costs. If it weren’t for the involvement of families and volunteer groups in providing daily assistance and personal care to seniors, many elderly today would be suffering from poverty and isolation. In two societies with so much wealth, can Canadians, Americans and their governments really ignore the future reality of trying to live in comfort as a retired senior?
FROLITICKS 