And if the collective pension plans served as an economic lever!
December 18, 2013
Retirement figures amongst the important issues of this decade. It was so that the topic was put on the agenda of priorities of the various levels of governments. Furthermore, mayors made it an electoral issue last fall.
On December 18, the Minister of Labour and Social Solidarity presented an action plan aimed at restructuring the defined benefits pension plans for the municipal, university and private sector. To do this, different measures will be set up and among them three proposed legislations are foreseen. Pressured by the mayors, the Minister of Labour may even table a first draft of a law as soon as parliament returns in February 2014.
Moreover, a meeting of the federal/provincial/territories ministers of finance was held on December 15 and 16 in Outaouais to discuss pension plans. It was no surprise that the Minister of Finance for the Harper government objected to the admissibility of the consensus of the provinces to improve the Canada Pension Plan (CPP) and its counterpart, the Quebec Pension Plan (QPP). This then produced an echo with the Conseil du patronat and the Canadian Federation of Independent Business (CFIB) in particular, who had rejected an increase in employer contributions, under the pretext that an increase in dues would kill jobs. Remember that the federal government, in its 2012 budget, announced a progressive increase in the retirement age, from age 65 to age 67, to receive the Old Age Security Pension (OAS), the only universal pension plan in Canada.
In the summer of 2013, the employer group also rejected the idea of a longevity annuity, funded equally by the employers and the employees and payable as of age 75. The D’Amours Committee proposed it in their report tabled in the spring. Its main argument was that an increase in life expectancy should not leave the elderly in a position where they are unable to pay for their needs, particularly for their care. The employer side were opposed to this fearing that the contributions would kill jobs. On its side, the Commission des finances publiques that studied the D’Amours Report put the idea aside for the time being. However, it is very obvious that such an annuity is a transfer of wealth from the poorest social groups (both genders combined), who on the whole die at a younger age, towards the more wealthy who also have the chance of living longer.
In the meantime, the Government of Québec has chosen to focus on the Voluntary Retirement Savings Plans (VRSP) that will enable thousands of workers to save for their retirement, if they do not withdraw it of course. The beauty of the project comes from the fact that the employers will have no obligation to contribute to them. This law therefore, puts the burden of retirement only on the shoulders of the workers.
Improving the public pension plans like the Quebec Pension Plan (QPP) or the Canada Pension Plan (CPP) is a better option for assuring a decent retirement than to opt for personal savings or to gamble on a longevity annuity. The latter options only transfer the burden of retirement on to the shoulders of the workers and in the end contribute to enriching the financial institutions which manage these types of programmes. In other words, what the advocates of this option forget to take into account is that if the retirees become so poor as to no longer be able to contribute to keeping the economy going that would inevitably have a negative impact on the continued employment of the younger generations. We must avoid playing one generation against another.