retirementsign-8751915n05-by2.0_0-1.jpg
retirementsign-8751915n05-by2.0_0-1.jpg This article is more than 7 years old

Why expanding CPP is a no-brainer

Need more proof the Harper government is wrong to oppose the expansion of the Canada and Quebec Pension Plans? A new report released Monday lays out why the Conservatives’ big idea to solve the country’s pension crisis — to encourage people to plough more money into private investments, such as RRSPs — works well for the […]

Need more proof the Harper government is wrong to oppose the expansion of the Canada and Quebec Pension Plans?

A new report released Monday lays out why the Conservatives’ big idea to solve the country’s pension crisis — to encourage people to plough more money into private investments, such as RRSPs — works well for the mutual fund industry, but not real people concerned about retirement insecurity.

Here are some key numbers from the report titled Risky Business: Canada’s Retirement Income System, by the Canadian Centre for Policy Alternatives:

  • Old Age Security and the Canada and Quebec Pension Plans are credited for “substantial reduction in poverty among seniors, especially women.”
  • Just 11.1% of the workforce are covered by private workplace defined benefit pension plans, down from its peak of 28.6% in 1982.
  • Only a quarter of Canadians who earn between $40,000 and $60,000 contribute to an RRSP.
  • 16% of tax filers have incomes over $80,000, yet they account for 30% of RRSP contributors and 57% of contributions.
  • Even those who are contributing to an RRSP aren’t using their allotted room, with unused RRSP contribution room up by 38% since 2007 (exceeding $638 billion).
  • Reducing the risk of running out of retirement savings is “prohibitively expensive,” the study found. “The cost to reduce the odds that a male will outlive his retirement savings from one in two to one in four is an 18% increase in required savings. For a female, the tab would be 13%.”
  • A person who contributes a constant percentage of their income over their working life to an RRSP pays an average of 2.07% annually in investment management fees to mutual fund managers. “Over a working lifetime, that soaks up about 36% of his retirement savings.”

The bottom line?

“One message is clear from the analysis. The Canadian retirement income system may be working well for the mutual fund industry. For individual Canadians, not so much.”

But the “problem with RRSPs and their cousin PRPPs, compared with the CPP/QPP alternative, goes beyond high fees. They earn lower returns, even before fees are factored in. And they fail to provide a cost effective way to protect against the risk of outliving your retirement savings. RRSPs and PRPPs are not an acceptable substitute for a pension plan. When stacked up against the realistic alternative of an expanded Canada/Quebec Pension Plan, they deliver an inferior product at more than twice the cost.” 

Help us protect Canadians by holding the powerful accountable.

Journalism is an important public service. That’s why PressProgress is prioritizing stories aimed at keeping Canadians safe and holding the powerful accountable during the coronavirus pandemic.

Please consider supporting our award-winning non-profit news organization so we can keep making a positive impact for Canadians.

 

Support Our Journalism
PressProgress
PressProgress is an award-winning non-profit news organization focused on uncovering and unpacking the news through original investigative and explanatory journalism.

Most Shared

thumb-2021-05-011 News Brief

Long-Term Care Executives Give Themselves Big Bonuses Claiming ‘100% Customer Satisfaction’ During Deadly Pandemic

Related Stories

News Brief

Catholic Sisterhood Calls For Mike Harris’ Removal From Board of For-Profit Long-Term Care Company

View the post
Explainer

Canadians Are Talking About ‘Defunding the Police’. Here’s What That Means and What It Could Look Like.

View the post
News

Doug Ford’s Government Wants TVO to ‘Commercialize’ Online Learning Content Designed for Ontario Schools

View the post

Explainers

Human rights & inclusion

Amira Elghawaby

Canadians Are Talking About ‘Defunding the Police’. Here’s What That Means and What It Could Look Like.

View the post
Politics & strategy

Tom Parkin

How Federal Leadership Can Help Establish Important Social Programs and Health Reforms

View the post
Power and democracy

Andrea Reimer

Why Powerful People Do Stupid Things

View the post