A better nest egg for our retirement

More than half of Canadians fear they aren't saving enough money for their retirement. Unfortunately, their fears are justified. Statistics show one in five Canadian working households have no retirement savings.

Only about one-third of workers in Alberta belong to workplace pension plans. Many of those who do may still not be socking away enough money for their retirement years.

People are living longer and costs are rising. Financial advisers have long suggested that retirees will require 60 to 70 per cent of preretirement income to live on after they leave their jobs, but the latest research suggests that range may still be too low. Many Canadians are likely only going to be able to muster 50 per cent of the pre-retirement income and in Alberta it is expected to be even less than that.

The governments of Alberta and British Columbia have seen the shocking predictions and are wisely making efforts to do something about it. In October 2007, they created a joint expert panel to look at the problem and come up with a program to bolster the Canada Pension Plan and Old Age Security income many of their residents will have to rely on for their existence when they retire. The Alberta Federation of Labour says those two federal programs will only provide about 14 per cent of the pre-retirement income of workers, leaving a huge gap between what they have and what they will need.

The obvious solution would be to dramatically bolster the federal programs-- a move called for by the federal NDP just two weeks ago.

NDP Leader Jack Layton says Canada is in a pension crisis and CPP benefits need to be boosted from about $900 monthly to $1,800. That, he says, would require a payroll deduction of about another 2.5 per cent. CPP was initially designed to provide replacement income of only 25 per cent of the average industrial wage, or about $11,000 annually.

Even the head of the Canada Pension Plan Investment Board has called for creation of a supplementary CPP benefit to top up the existing plan, noting that 11 million Canadians have no access to a pension.

But Ottawa has seen no urgency.

Prime Minister Stephen Harper told Parliament the government is still consulting with Canadians and the provinces on pension reform. Alberta MP Ted Menzies, the federal finance minister's point man on pensions, has promised to submit proposed recommendations for changes for the country's finance minister's to consider at their next meeting in December.

Alberta and British Columbia are holding Harper's feet to the fire by saying they will press on with their own ABC plan if the federal government fails to deliver meaningful proposals for reform.

Alberta Finance Minister Iris Evans told Canwest News Service this week that there are "frightening" gaps in the retirement plans of Canadians and Alberta and B.C. will push on alone if they have to. "It's not going to slow our horses out here," she said, in true Alberta fashion.

Albertans and all Canadians need action on this file now, but there is value in a national plan that is portable. How well will we be served if every region of the country has its own plan? Already we're hearing that the Wildrose Alliance wants to pull the province out of CPP in favour of an Alberta-only plan.

Critics have also raised some serious concerns about the ABC plan, which is proposed to be voluntary. That means employers, who currently don't have their own plans, won't have to participate in this one either or contribute to their employee's pensions. There are also concerns that the ABC plan is to be a defined contribution plan rather than a defined benefit plan that guarantees retirees a specific monthly amount when they retire. Under a defined contribution plan, benefits could be reduced if the economy sagged.

While the ABC proposal is better than what Albertans have today-- since some of them have nothing-- let's hope Ottawa answers the bell with something that's more than a Band-Aid. Canadians need pension reform now if they are to be spared a retirement into poverty.

Edmonton Journal, Fri Nov 6 2009

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