Securing a Comfortable Retirement

Canada needs serious pension reform, but it will take strong federal leadership to overcome the naysayers.

Back in 1963, a loud chorus of naysayers tried to block Prime Minister Lester Pearson’s crusade to create the Canada Pension Plan. More recently, in 1997, Finance Minister Paul Martin faced strong opposition to his efforts to make the CPP solvent for generations to come. In 2010, the arguments of opponents to serious pension reform are eerily similar to those arguments from bygone days – and similarly wrong.

During many round tables across the country, we have heard countless middle-class Canadians tell us that they are profoundly worried they will not be able to retire comfortably. Polling data supports the view that Canadians see the retirement income issue as a major challenge.

There are also those who have told us everything is fine. People with vested interests have said that expanding the CPP would harm the economy, or that people always worry about their pensions after a recession and that now is no time to entertain “knee jerk” policy reactions. Most importantly, we’ve heard the finance minister say that the Canadian pension system is doing just fine, and that federal-provincial discussions are complex.

In the mid 1960s, opposition to the creation of the CPP was couched in similar terms. Newspapers focused on divisions between governments. Big business opined that a CPP would distort financial markets. The Porter Commission on Banking and Finance concluded that there were serious questions about “the ability of the economy to support such pension benefits.” The president of the insurance company Great West Life led the charge, vowing to stop the CPP and saying, “Let’s raise a storm. Let’s make it a good one, the strongest most lightning-packed, angry wind that has blown around Parliament Hill for a long time.”

Judy Lamarsh, minister of health and welfare and sponsor of the CPP legislation, famously made public a letter from a constituent that read, “My insurance company asked me to write to protest some legislation you have pending. I don’t exactly know what legislation this is, but you’ll probably know. So whatever it is, I’m against it.”

Some 35 years later, Paul Martin faced strong criticism from the Reform Party over the hikes to CPP premiums that were necessary to guarantee the long-run solvency of the program. At the time, Stephen Harper even wanted to privatize the CPP.

We know today that those fears did not come to pass. The Life Underwriters Association came to view the CPP as a valuable tool that made Canadians more conscious of the need for financial security – a consciousness that increased their sales. And today the Conservative government takes pride in the fact that the CPP is actuarially sound.

But this is no time to rest on our laurels. Life expectancy is ten years longer than in the 1960s, and if we want seniors to maintain their independence and a decent standard of living, we need to strengthen all three legs of the financial security stool: public pensions, private pensions, and incentives for private saving.

So the federal government should take a leadership role in creating a voluntary supplementary CPP to strengthen public pensions. Let’s also eliminate barriers to multi-employer pension plans in order to strengthen private pensions. And let’s look at measures like making RIFF withdrawal rules less severe in order to help Canadians who rely on their personal savings to finance their retirement.

As was the case in the 1960s and 1997, Canada needs major pension reform in 2010. History shows that there will always be naysayers and that strong federal leadership is key to making this happen.