February 27, 2014
We have seen plenty of headlines and news stories about the subject of retirement in Canada. “Workers to Rely on the CPP.” “Not Enough Employees Making RRSP Contributions.” There are positive stories and negative stories, but whichever side they take, most of them are off the mark. The issue arises when the word “pension” enters the conversation.
First, the Canada Pension Plan (CPP) – and the accompanying Old Age Security (OAS) program – actually give excellent pay replacement for low paid workers. Other issues such as social injustices, minimum wage inadequacy, corporate offshoring of jobs or a focus on shareholder returns at the expense of the worker are issues of income adequacy. Now, maybe you believe that people shouldn’t have to survive on such a low income. I’m not arguing with you there, but that is not a pension issue. The pension industry is about maintaining a decent level of pre-retirement income after retirement. CPP does that.
Second, Registered Retirement Savings Plan (RRSP) contributions could help alleviate the retirement income adequacy problem. Unfortunately, some people just don’t have any money left after meeting life’s needs to make meaningful contributions. So again, not a pension issue. And if interest rates go up, taking mortgage and credit card payments with them, contributions will not get larger any time soon.
I guess all I am saying is that the stories are misleading. They should not be under the heading of pensions. How about this instead: “Latest Retirement Statistics Highlight How Lack of Economic Growth Will Affect Tomorrow’s Retirees?”