The Pension Crisis

Jack Layton, the leader of the NDP in Canada says that the Country faces a ‘national pension crisis’.

As you can find with a search on Google Insights, this same concern is expressed elsewhere around the world as shown by the following chart for searches on ‘pension crisis’:

Concern about pensions in the UK is several times that here in Canada and in the US pension concerns almost match those in Canada.

In a nutshell, the problem stems from people living longer while the global recession has severely damaged what people and pension funds had put aside for their retirement.

As Jack Layton said:

Fewer than 40% of Canadians have workplace pensions and those who rely on their registered retirement saving plans have seen “billions of those savings vaporize”. He urged the government to inject $700 million into the guaranteed income supplement to help 226,000 seniors living below the poverty line.

It seems quite clear that what was a Simmering pension crisis is now coming to a boil.

Monica Townson has written a succinct analysis of what is wrong and what can be done.  Her nine-page paper, commissioned by the Tommy Douglas Research Institute, contain two clear messages.

• The first is that there is no “magic bullet that will fix everything.” It will take a mix of reforms – some fast-acting, some long-term – to shore up the pension system.
• The second is that Canada has to get moving now.

Townson’s paper is available on the Canada Centre For Policy Alternatives website.

She highlights the weakness in each layer of Canada’s three-tiered retirement income system:

• Old Age Security was designed to keep seniors above the poverty line. One out of every seven unattached older women lives in poverty. It would take an increase in the across-the-board senior allowance or the low-income supplement to rectify this problem.
• The Canada Pension Plan was meant to top up the coverage provided by employers. But 62 per cent of workers have no employee pension. It would take a major expansion of the CPP – financed by another hike in premiums – to provide an adequate pension for all members of the workforce.
• Registered retirement savings plans were created to encourage Canadians to set aside money for their non-working years. Contributions are tax sheltered. But the vast majority of Canadians (69 per cent) don’t contribute.

Seniors have not been putting away savings anywhere else so the result is that millions of Canadians are heading toward retirement with too little to live on for the rest of their lives.

A solution will require that all levels of government work together and the Federal Government must provide the leadership in this if timely solutions to this pension crisis are to be developed.

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