Champions for Pensions (C4P)
Member to Member presentation
The Three Pillars of
Canada’s Retirement Income System
OAS / GIS
CPP
Private Savings
(workplace pensions
& RRSPs)
The combination of all three pillars should provide a healthy
retirement income for working people
(generally recognized as 70% of one’s pre-retirement income).
Each of the pillars of Canada’s retirement income system
have major weaknesses:
In Pillars 1 (OAS / GIS) and 2 (CPP), the benefits are
low and need to be increased.
Pillar 3 (private savings) fails to provide any retirement
income for the majority of Canadians:
 Only 38.8% of the Canadian labour force belongs to a
pension plan; and
 Only 31% of Canadian tax filers contribute to an RRSP.
Each of the pillars of Canada’s retirement income system
have major weaknesses:
In Pillars 1 (OAS / GIS) and 2 (CPP), the benefits are
low and need to be increased.
Pillar 3 (private savings) fails to provide any retirement
income for the majority of Canadians:
 Only 38.8% of the Canadian labour force belongs to a
pension plan; and
 Only 31% of Canadian tax filers contribute to an RRSP.
Other factors contributing to Canada's retirement security crisis:
Aging of the population – Percentage of Canadians over 65:
 7.7% in 1966
 14.8% in 2011
 25.5% expected in 2061
Slower labour force growth – Less workers supporting
more retirees
Shift from defined benefit (DB) to defined contribution (DC)
plans – the primary concern about the shift to DC is the lack of
predictable retirement income
The biggest obstacle we face as an aging nation –
a majority of Canadians don’t have a pension plan and
are unable to adequately save for their retirement.
We must address the private sector’s failure to provide decent
pensions for Canadians.
If not, more and more Canadians will be living in poverty in
their retirement years.
But the economic consequences are much greater!
Workplace pension plans – a key component to
building a healthy and sustainable economy
A huge pool of investment capital in the Canadian economy:
 Canadian pension funds have over $1 trillion of assets –
second largest source of capital after the chartered banks;
 70% of all pension fund assets are invested in the Canadian
economy; and
 Pension plans are important contributors to Canada’s
economy.
Workplace pension plans – a key component to
building a healthy and sustainable economy
Increase the purchasing power of retirees:
 Workplace pensions help workers maintain their standard of
living when they retire;
 They account for about 20% of the overall purchasing power
of all retirees in Canada; and
 Income from workplace pensions amounts to some $40
billion a year – an important economic stimulus that supports
jobs and local economies.
Workplace pension plans – a key component to
building a healthy and sustainable economy
A positive influence on labour markets:
 Workplace pensions enhance the ability of employers to
attract and retain qualified employees; and
 Workers with pensions are less likely to quit and more likely
to have longer job tenure.
A positive influence on government finances:
 Workplace pensions reduce the cost of publicly funded
income support systems; and
 They increase federal and provincial revenue – income taxes
and sales taxes.
The solution to
Canada’s Retirement Security Crisis
Defend and promote Defined-Benefit (DB) plans – the far
superior type of pension plan:
 DB plans are under attack by the mouthpieces of corporate
big business – the are engaged in a relentless campaign of
misinformation; and
 Their solution – get rid of DB plans and bring everyone
down to the lowest common denominator.
It’s time to go on the offensive:
 It’s time we demolish their tired old arguments that Canada
can’t afford decent pensions for all!
The Advantages of Defined Benefit Plans
Security – Offers a secure income for life to retirees and, in most
cases, pays benefits to a surviving spouse.
Less Risk / Greater Certainty – Provides less risk to a worker
and greater certainty on how much pension income the worker
will have in retirement.
Additional Benefits – Can provide enhanced benefits in addition
to the basic pension, such as early retirement benefits, survivor
benefits beyond those required by legislation, portability,
disability benefits and inflation protection.
The Advantages of Defined Benefit Plans
Lower Administration Fees – The cost of administering a DB
plan is shared among all beneficiaries, so less of the funds are
taken up by management fees.
Higher Investment Returns – DB plans historically achieve
higher investment returns than DC plans because of their ability
to manage assets at significantly lower fees.
Pooling of Risks – DB plans reduce the overall cost of providing
benefits by pooling mortality (and other) risks over a relatively
large number of participants.
The Advantages of Defined Benefit Plans
Mandatory retirement savings for a secure benefit – DB
contributions are mandatory and are set at a certain level to
assure a specific benefit based on one’s age and years of service.
Positive impact on local economies – DB pension benefits paid
to retirees act as a financial engine bolstering local economies.
Positive influence on government finances – DB plan benefits
take pressure off public income security programs and other
public services like the provision of home and long-term care.
Positive influence on labour markets – Enhance the ability of
employers to attract and retain qualified employees.
DB plans are affordable and sustainable
Most public sector employees have a “gold-plated” pension.
 The majority of public sector workers are paid less than a full
pension – which is 70% of pre-retirement salary.
 The attack on public sector pensions is wrapped in rhetoric
about fat-cat public servants, but it is really an attack on the
lower-paid workers.
 The average pension income of a retired government employee
is just over $20,000. And for those age 65 and over, this also
includes the amount they receive from CPP.
DB plans are affordable and sustainable
Taxpayers pay for the pensions of public sector workers.
 Public sector employees directly contribute anywhere from
40% to 50% to the costs of their pension plan.
 It's not a gift from the taxpayers or a hand-out from the
employer – it's a part of the employee's pay – salary to be
used as retirement income.
DB plans are affordable and sustainable
Pension contributions paid by public sector employers are
subsidized by taxpayers.
 Canadian taxpayers help subsidize retirement savings
of all workers, whether they work in the private or
public sector.
 Contributions made to all pension plans are tax
deductible and cost Canadian taxpayers around $10
billion a year.
 RRSP programs cost the federal government over
$12 billion a year in foregone tax revenues.
DB plans are affordable and sustainable
Taxpayers are on the hook to cover public sector pension
deficits.
 Defined benefit plans are designed to withstand
economic downturns because they pool everyone's risk.
 Over the very long time horizon these pension plans
operate, there will be deficits and there will be
surpluses.
 Throughout the 1990s, public sector pension plans
across the country ran up some fairly huge surpluses.
DB plans are affordable and sustainable
It’s not fair for public sector workers to have good pensions
when most private sector workers do not.
 Everyone deserves a decent pension, including
workers in private companies.
 Inequality isn’t solved by dragging everyone down
to the lowest common level.
 Isn’t a far better solution to ensure all working
people have access to an adequate pension plan
rather than weaken and reduce quality pension
plans?
Rebuild and Reform Canada's
Public Pension System
It’s time that our federal government focuses on
public and universal solutions.
It’s not acceptable to offer Canadians more of the same
“fend for yourself” approach to retirement security.
Offloading our collective responsibility onto
individual workers for their financial security
in retirement is not a solution.
Here are three proposals that provide a realistic, affordable and
effective plan to rebuild and reform Canada's pension system:
Rebuild and Reform Canada's
Public Pension System
1. Increase Old Age Security (OAS) and the
Guaranteed Income Supplement (GIS)
We need to immediately strengthen Canada’s public pensions
for the most vulnerable seniors.
But benefit levels for OAS and the GIS are inadequate, despite
that many Canadian seniors depend on them as their sole source
of income.
Let’s begin with an immediate 15% increase to the GIS, which
would cost $1.1 billion. This is a small fraction of what’s
currently spent on tax subsidies for RRSPs.
Rebuild and Reform Canada's
Public Pension System
1. Expand the Canada Pension Plan
Our CPP is the envy of the world: it’s secure, funded on a
sound basis and well managed by professional staff.
The only problem with CPP is that benefit levels are too low
to provide Canadians with adequate income security in their
retirement.
We need to double CPP benefits to ensure a better minimum
pension for all Canadians.
Rebuild and Reform Canada's
Public Pension System
Why expanding CPP is the best solution to providing Canadians
with adequate retirement income:
CPP already covers virtually all Canadian workers.
CPP offers a guaranteed income to all Canadian retirees.
CPP provides a number of benefits in addition to a monthly
pension.
Rebuild and Reform Canada's
Public Pension System
Why expanding CPP is the best solution to providing Canadians
with adequate retirement income:
CPP is the most portable pension plan in Canada.
CPP benefits rates are increased annually to the rate of
inflation.
CPP compensates employees for periods of low earnings.
Rebuild and Reform Canada's
Public Pension System
Why expanding CPP is the best solution to providing Canadians
with adequate retirement income:
CPP provides Canadians with a risk-free investment.
CPP is well managed with low administration costs.
CPP is secure, stable and sustainable for generations to come.
CPP plays a significant role in Canada’s economy.
Rebuild and Reform Canada's
Public Pension System
1. Better regulation of Canada’s private retirement savings system
Federal & provincial legislators need to strengthen the regulatory
system governing those financial institutions responsible for
managing the retirement savings of millions of Canadians.
Governments must ensure greater transparency and better labelling
of financial products the mutual fund and insurance industries sell.
There should be reasonable limits set on administration costs for
pensions as well as the management fees the mutual fund industry
charges on RRSPs.
Rebuild and Reform Canada's
Public Pension System
A secure and adequate income during retirement
should be the right earned by workers for decades of
contributions to one’s community and Canada’s economy.
It’s one of the key cornerstones for a
strong and sustainable Canadian economy.
For more information and to sign the
Champions 4 Pensions pledge go to:
http://alltogethernow.nupge.ca/champions-4-pensions