- Why is retirement income security an election priority of Federal Retirees?
- But everyone gets the CPP – isn’t that enough?
- Should Canadians be worried about the viability of the CPP?
- So, what about other retirement saving options and other workplace pension plans?
- But don’t federal retirees still have better pensions than everyone else?
- But, defined benefit plans are risky and expensive. Why protect them?
- It doesn’t seem fair. I’ve worked hard, and I don’t have a pension – what about me?
- Employers going bankrupt? Why are we talking about this? We’re in the public sector and our pensions are guaranteed.
1. Why is retirement income security an election priority of Federal Retirees?
Statistics Canada estimates that 12% of senior families are considered low income, and that 28.5% of single seniors qualify as low income — that’s 600,000 Canadian seniors living in poverty. While recent increases to the Canadian Pension Plan (CPP), Old Age Security program (OAS) and Guaranteed Income Supplement (GIS) are steps in the right direction, more needs to be done to ensure that Canadians can afford to live in dignity in their later years – such as protecting accrued or earned pension benefits, strengthening defined benefit plans, and protecting employees and retirees in insolvencies.
2. But everyone gets the CPP – isn’t that enough?
Simply put, no, it isn’t enough. The maximum CPP retirement pension (starting at age 65) in 2018 was $1,134.17/month. However, only 6% of retirees actually receive the maximum amount. The average CPP retirement pension was only $637.10/month, and only $424.15/month (on average) for survivors.
3. Should Canadians be worried about the viability of the CPP?
No — the CPP is sustainable for at least the next 75 years, according to Canada’s Chief Actuary. In fact, investments are expected to reach $500-billion by 2024. 20% of these investments, to the tune of approximately $54-billion, are in the Canadian market in everything from major infrastructure projects, to real estate, to natural resources, to local companies. Not only is the CPP viable, it is integral to our economy.
4. So, what about other retirement saving options and other workplace pension plans?
Workplace defined benefit pension coverage continues to decline — dropping from 87% in 1993 to just 37% in 2011 for private sector workers. During this time, there has been a significant shift to defined contribution plans, and many employers have eliminated their pension plans altogether. While other personal savings products like Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) exist, Canadians just can’t save enough for retirement due to rising housing costs and stagnating wages. Plus, these products are less efficient than defined benefit pension plans as they do not allow for pooling resources, and revenue can be eaten up by high fees and bear higher risks of market fluctuations.
5. But don’t federal retirees still have better pensions than everyone else?
On average, federal pensioners receive approximately $30,000 per year, with women receiving an average of approximately $25,000 per year and survivors receiving only approximately $14,000 per year, all amounts before taxes. In 2016, single-person households with after-tax annual income of $22,000 or less, and two-person households with $32,000 or less, were considered low-income.
This isn’t free money either — it’s people’s own savings. Their pension is part of their wages — it’s deferred earnings. It was mandatory for federal employees to set aside a percentage of their pay on every cheque to contribute to their pension plan.
Given rising housing costs and living expenses, most federal retirees have just enough to get by. While some federal retirees are living more comfortably in retirement, many face the same financial challenges as other Canadian retirees.
6. But, defined benefit plans are risky and expensive. Why protect them?
The perception that defined benefit plans are unsustainable or too costly is false. Actually, defined benefit plans are the most effective means of generating retirement security. In fact, studies show defined benefit plans can deliver the same retirement income at 48% lower cost than a defined contribution plan, due to lower fees, a balanced investment portfolio and longevity risk protection.
Plus, retirees with defined benefit plans are less likely to rely on government assistance, such as the Guaranteed Income Supplement (GIS). In fact, defined benefit pensions reduce the annual GIS payout by $2-3 billion each year.
7. It doesn’t seem fair. I’ve worked hard, and I don’t have a pension – what about me?
Many Canadians have struggled and continue to struggle to make ends meet. With rising housing and living costs, it is becoming increasingly difficult to save for retirement, and workplace pension options are becoming fewer and farther between. And you’re right — it shouldn’t be this hard.
Whether you have lost your pension due to mismanagement by your former employer or haven’t had the opportunity to save as much as you need, you deserve to have a safe, secure and dignified retirement.
Retirement income security for one group doesn’t come at the expense of another. Ensuring all Canadians have the means to afford a healthy and secure retirement needs to be a priority. Protecting existing pension plans and supporting the growth of the CPP, along with other public policies and programs will be essential to ensuring that tomorrow’s seniors are not facing the same challenges that face today’s seniors.
8. Employers going bankrupt? Why are we talking about this? We’re in the public sector and our pensions are guaranteed.
While it’s true that our members’ pensions are not directly affected by employer insolvencies in the same way as private employees, Sears employees for instance, they are affected by broader trends in pensions.
Defined benefit pensions are not always guaranteed – and as they become less secure throughout the country, our members’ plans can become a target. Our members’ former employer is also the country’s legislator and regulator – it means that they have the ability to pass laws and regulations that could potentially impact our members’ pensions. If defined benefits across the country are under attack, much like they were when Bill C-27 was introduced, we risk being the next target. Working to protect defined benefits writ large helps others – but also our members as well.