OTTAWA — The Harper government’s point man on pensions says individual Canadians must take more responsibility for ensuring they have enough money to live on during retirement as part of any effort to revamp existing pension options.
Ted Menzies said the government is willing to be part of the solution to what many experts see as a burgeoning pension crisis, but that Canadians have to do their bit, too.
“My philosophy is that we need to be responsible for ourselves,” Menzies said in an interview with Canwest News Service and Global Television.
Menzies acknowledged federal and provincial governments have been forced to focus on pension reforms in part because of the frightening prospect of millions of older Canadians falling into poverty in the coming years because their anticipated pensions had shrunk or because they didn’t save enough for retirement.
About six in 10 workers have no workplace pensions, meaning they must rely solely on public pension programs and their own saving to finance their retirement. Only about one-third of eligible Canadians make annual contributions to registered retirement savings plans.
Menzies said the challenge of finding a fix for now and the future is huge.
“We do need to get it right,” he said. “We have no idea how long our children are going to live, let alone our grandchildren. And what is it going to cost them to live?”
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Notes:
My gut instinct tells me there is a lot wrong with our current retirement situation beginning with paying out to people who have never contributed a dime. Then there is the high taxation of workers in years past that placed them in the unhappy situation of never being able to save as they raised kids and tried to buy a home. Also, CPP contributions which go into general revenue (I could be wrong on that point).
“Anyway”, I’ll leave this matter for people much better versed in the “mechanics” of the situation to weigh in. It should be a hot topic.
Fine words from a gov’t minister who benefits from an extremely generous publicly funded pension.
Why haven’t people saved more? High levels of taxation mean only the higher paid have any left over for saving.
There are many people who contributed to a company pension plan, whose RRSP contributions were severely limited. Some of these companies have gone bankrupt leaving the pensions insolvent resulting in the employees having insufficient RRSP funds to survive. They followed the rules and got screwed.
mid island mike
How can Canadians save with constant layoffs, cut backs, ever increasing cost of living, risng taxes, (U.S. caused) financial meltdowns every ten years, Ponzi Schemes?
My guess that there will be a lot of seniors living on the streets in the near future.
There is plenty of blame to go around. High taxes, dropping wages, distrusts of markets and brokers etc…
Many, if not most, CHOOSE not to save. They live in bigger house than they need and in some cases can afford. They drive nicer cars than they need or can afford. They go on trips, eat out a once or twice (or more) a week. All this is their choice. Which is their right and if you earn it then you can spend it however you wish.
What pisses me off is when they complain, constantly, about how they have no money and it is so hard to save. Try spending less dumbass.
@Mike. Couldn’t agree more with your first statement. Give up your gold plated pension, then start preaching.
Actually Jack, the CPP contributions do not go into general revenue. They are invested by the CPP investment board (or some similarly named board). Unlike EI, they are kept completely separate from other revenues.
Ultimately, Menzies is right. We’ll need to switch to defined contribution plans. Defined benefits plans are nice, but not feasible in the long run. You can legislate pensions all you want, but if the money isn’t there, it won’t matter what the legislation says you’re supposed to get.
Nortel workers have lost their pension. That wouldn’t have happened under a defined contribution plan, where each employee manages his/her own retirement funds (both his own and his employers’ contributions). There can be no unfunded pension liabilities under a defined contribution scheme. A defined benefits scheme, however, creates massive unfunded liabilities with each downturn in the market.
Theres certainly nothing more generous than a MP’s pension plan. I believe they only have to be in office six years to qualify for something over $100,000 annually.
I stand corrected, I believe being a Senator is better than being retired. Does anyone know who their Senator is?
Re: #4 — “Actually Jack, the CPP contributions do not go into general revenue. They are invested by the CPP investment board (or some similarly named board). Unlike EI, they are kept completely separate from other revenues. ”
I stand corrected (and thanks). Having said that I freely admit you have lost me with your follow on comments:
“That wouldn’t have happened under a defined contribution plan, where each employee manages his/her own retirement funds (both his own and his employers’ contributions). There can be no unfunded pension liabilities under a defined contribution scheme. A defined benefits scheme, however, creates massive unfunded liabilities with each downturn in the market.”
I don’t know the difference.
Mr Menzie,
I am responsible for our finances, it is your government that over taxes our family because we were a one income family for 10 years. Maybe if you didn’t over tax us so much and give us Income Splitting I may have had an RRSP or if you gave parents at home the same tax break daycare parents get then I could have invested that. INSTEAD I’M STUCK WITHOUT A PENSION AND A MINIMUM WAGE JOB IN MY LATE 30′S BECAUSE YOUR (AND THE OPPOSITION) GOVERNMENT WON’T ACKNOWLEDGE MY PROFESSION AS A PARENT IN THE ECONOMY.
Current government monetary policy is designed to keep us spending more than we earn in order to prop up prices so as to prevent the natural deflationary effect of the recession. The trade-off is that inflationary near zero interest rate policies devalue any retirement savings faster than they can be accumulated, and will promote more destructive boom and bust markets unless interest rates are adjusted upward in a timely enough fashion. In other words, the Harper government’s ticket out of the current recession has been to use taxation and banking policy to prop up housing as an investment, but they seem to have little confidence that housing will retain its value over the long haul, once high inflation, or the interest rate hikes needed to curb it, have started to take their toll. Hence the need for Canadians to start thinking about finding additional means of funding their retirement plans. Seems irresponsibly short sighted to me but it should keep the Conservatives out of hot water for at least another election cycle.
Just to mention that Ontario MPP’s are different than the feds – in case anyone wonders. Remember Mike Harris kept his promise to get rid of their pension plan and he did during the first year he was in office 1995/96. So, while the feds do get a pension after six years and after age 55 (based on their years of service as not all MP pensions are equal), Ontario policians don’t get any. Rather, they get an annual RRSP which is invested for them.
Frankly I am surprised McGuinty and company didn’t try to put those pensions back in place. My guess is the only reason they didn’t is because it would take legislation to do so and they know that would never fly.
It’s one of the reasons that my RRSP is mine and directed by me instead of my employer – my employer contributes to it as part of my benefits package but if they go out of business, or I switch jobs, my RRSP is still mine.
That said, putting much aside when I was married, and we were raising 4 kids, and paying a mortgage, and insurance, and those taxes others mentioned, and the pensions for federal or provincial or territorial crawlamentarians past, and on, and on, and, on, setting much aside was nigh on impossible so both me and my ex started saving later in life than we probably should have.
With luck these “tough economic times” everybody talks about will help me out somewhat, while everyone else was worried and selling I was emptying my bank account the day before payday and buying as much as I could at nice low rates and slogging it into the RRSP portfolio as fast as I could — when we come out of this and prices start to rise I might be OK, but just in case…. does anybody know of a wealthy widow lady looking for an anarchist to make her final days more interesting?
Stageleft – you might try Hedi Frychip from BC although I dont know whether shes a widow or not but she maybe entitled to a very nice taxpayer paid pension for life.
Taking responsibility is completely contrary to the liberal way… I’m sure the opposition will be outraged by Menzie’s position.
pension plans that are now company owned in Canada should be kept separate from and protected from the company The plan should not be part of bankruptcy
this is done in Switzerland where my son works
employer contributes and employee contributes this is transferrable and owned by employee
and protected by Swiss law
fh
Very few of my peers think the Canada Pension Plan will make any difference in the long run. Even if it is still around to make good on retirement benefits in 60 years, they won’t count for much. Canada should seriously consider dropping it. As for private pensions, the US economy just delivered a stinging lesson on what happens when you put your money into defined contribution plans. It turns out the untouchable and unassailable “market magic” doesn’t always work and now many Americans have no retirement plan at all. That leaves defined benefit plans, which are infinitely more useful but are mostly for government-based workers, while the actual benefits are being slashed. Older Ontario Hydro workers currently enjoy pensions that surpass the median income in Canada but their children won’t be so lucky.
Not sure why y’all hate Trudeau so much – he set you up nicely.
For this generation … RRSP’s are the way to go. People who bought a 10-year GIC a decade ago often got a better return than on the stock market, which basically didn’t move when all was set and done.
Sara, I fully expect to see income splitting for families offered up in the Spring budget. Nothing less.
Over the quarter century, too many unethical companies have sought and found loopholes in their pension plans to disqualify employees between 25 and 40 years’ service. These people experienced the heavy hands in their last five years of service and more than a few had to initiate lawsuits to secure their pensions. Perhaps a majority gov’t will go there at the first opportunity carving out legislation to address such instances.
Meanwhile, what’s certain is that the former approx. 26 percent wage raises announced by many provincial gov’ts have adequately provided some with the RRSP needed contributions. But the main game without a doubt has been for especially private enterprises to attempt to walk away from honouring employees’ pension dues in their last few years prior to retirement. It’s sure many haven’t had the resources to endure a long drawn out court battle.
The CPP was never set up to be any replacement for personal retirement savings. It was a “take from Peter to pay Paul, type of plan”. The money you paid in each pay period actually funded retirees today and not at all for tomorrow. That was one of the reasons why RRSP’s were invented. The TFSA on the other hand is a sea change for younger generations to save for retirement, because of the outright elimination of taxing your savings. RRSP’s are really just a tax deferal mechanism. Some financial planners even suggest that if you are under $100,000 on RRSP’s, it may be better to collapse the RRSP, pay the witholding tax on it and use the TFSA instead to save for retirement.
This is a great topic and I’m certain some politicians who visit here are following it with interest (although they aren’t saying anything).
Many years ago now I got into a hell of an argument with my father one evening over pensions. He (at the time) was the senior Canadian V/P of the Brotherhood of Locomotive Engineers and had been into “this stuff” much of his career in that organization.
I grumbled that whenever I looked at my pay stub almost half of it was gone in “contributions” to this, that or the other thing. A large chunk was taken for pensions, both CPP and OMERS (or whatever) and it was pissing me off because I was also “taxed to the max” by both federal and provincial authorities and they were giving my money away to “feel better”.
This is true.
When I considered my “deductions” and then added all the taxes that didn’t show up there (gasoline, municipal taxes, etc.) my “take home pay” was less than 50% of what I earned and this is where the dispute arose.
I argued that my money was mine to pay out as I saw fit. After all, I had worked for it hadn’t I? What gave the government the right to keep me in penal servitude so that a bunch of arseholes could feel better as they did “the right thing” and societal leeches bled me dry.
Dad said “Good question. But here’s another thought. What happens to all the people who can’t manage their money and blow it in a casino? What do they do when they retire? They’ll starve to death.”
My reply: “Good point but you’re looking at the wrong guy if you expect me to support someone else’s lifestyle because YOU and all the morons that think like you feel they know better. Do you realize that if I had been able to pump the same amount of money that the government has literally stolen from me into a TD Greenline Fund I would be a millionaire when I retired.”
“Yah but…”
“No ‘yah but’ — you’re wrong and I don’t care if people who choose to retire at age 20 starve to death. They have a choice. They can go to work or they can vapor lock.
You — and people like you — can keep your hands off my money.”
The conversation ended and over the years my view has mellowed somewhat. I can see where he was coming from in part but still, after all these years and now into retirement, I am still severely pissed off. I say that because for over 40 years I ”babysat” 10% of the local population (as all cops do) — the same 10% of the population that continue to appear in our courts week after week, month after month, year after year. And guess what?
Few if any of them have ever held down a fulltime job or paid into a retirement fund. They beg, borrow and steal from those who do and when they get to old to do that anymore they steal from us yet again because of people with huge hearts who fail to see the big picture, buy into their sorry excuses and make laws that protect them.
I’m not one of them because I truly believe that “charity begins at home” and long before we give our money to countries that would kill us in an instant I think we should look after our own.
That idea begins with looking after our own families and branches out from there as we look at our native peoples and bonifide Canadian citizens. And “no” — I also believe there is no free lunch in Canada. If you want it you will have to work for it like many others — for years.
You can’t come here and dine off MY plate.
And what happens to those through no fault of their own, were unable to sock away any funds for retirement?
Already, both public & private nursing homes are full here in Ontario, city streets have many homeless and I expect that sooner or later, probably sooner, some of our poorer seniors will also end up on th street.
Consequently, I expect this problem will become an election issue in the near future and any party that has a workable solution, will probably take the day.
And lets not forget, adding to some seniors financial problems is that some adult children have returned to the family nest due to bad economic times while other seniors are baby sitting their grandchildren due to the lack of day care spaces.
I don’t know, UV. I only know that Canadians should start to look after each other first and if people are to lazy to work that’s their problem isn’t it? You can’t continue to expect that you can retire at age 20 in this country and our workers will feed you and look after you unto the grave.
We need to look at this situation again.
I will add that I am watching the US closely right now because they are going through their “Trudeau years”. I suppose that is why Harper is more interested in the US than he is in Canada. It’s fascinating as I watch an old movie I’ve seen before.
Watch out for next Tuesday because Obama is about to be hit over the head with a baseball bat. Yanks are fast learners.
And as a result America will turn into Brazil. They’re already there, for the most part. The genius of the winner take all game is that everyone can be conditioned into thinking they’re going to be the winner. Thus, adding any kind of public infrastructure or insurance is tantamount to pissing on one’s own victory lap, which of course no one wants to do. Who wants to tax themselves? Hence, screw everyone else, they should have worked harder so they can become rich like I’m gonna be.
It’s ingenious. Obama’s well-intentioned equalization and stabilization may defeat the GOP but it can’t beat 500 years of dog-eat-dog culture. America will have to become Brazil before it becomes Europe.
From what I am reading/seeing, some seniors are finding their retirement fast slipping away from them because of poor interest rates on their investments; some being caught in Ponzi schemes; rising cost of living and therefore are being forced to work well into their eighties. We will probably see more seniors working their final days in poor paying jobs at doughnut shops, retail stores etc.
Some may never retire.
UV, as of October 2008, U.S. retirement savers lost $2 trillion to market turmoil while the value of pensions (which are almost universally defined contribution in the US) dropped by 10%. While older workers tend to have a lower % of their money in the more volatile stock and derivative markets, they also have much larger balances to be lost.
Since government is the devil to many Americans, grandpa’s going to have to find his own way to hustle for some cash. There are very few ways to make money that fast but one shouldn’t be too hard to guess. Puritan talk means nothing when you’re hungry.
Cynapse, defined benefits plans are not any safer or more “useful” than defined contribution plans. The market does not differentiate between plans, and can equally decimate either one. A defined benefits plan is no less susceptible to the ravages of the bear market than is a defined contribution plan.
I should add that the major difference is, with a defined benefits plan, a market meltdown can suddenly create massive unfunded liabilities that, just a few months earlier, might have seemed near impossible. These unfunded liabilities can by themselves be large enough to bring a corporation down. And once the company collapses, well, there’ll be no more contributions of any kind.
Cynapse, defined benefits plans are not any safer or more “useful” than defined contribution plans. The market does not differentiate between plans, and can equally decimate either one. A defined benefits plan is no less susceptible to the ravages of the bear market than is a defined contribution plan.
The obvious and important difference is where the liability lies. If you work for the government, they’ll simply go deeper and deeper into debt before cutting off your defined benefit plans. Private companies may get a little fresh with the cuts to the benefits but all it does is trigger massive early retirements (which is happening at a couple major companies in Toronto right now) so people can take advantage of the benefits while they’re still good. Listen, I’m watching it right now – people retiring early with yearly pensions between $60k and $120k. If they had defined contribution then the companies certainly would have cut them off a la USA.
In any case, defined contribution plans are a virtual invitation for you to get screwed over. The company can cut you off for any reason at all since technically they owe you nothing but a proportion of their stated earnings. You may as well sock that money away into an RRSP, where at least you won’t lose the principal due to some backroom games (example: Enron taking the pensions of workers from the utilities it took over and dumping them entirely into Enron stock. Even before the company died those workers were screwed).