Category Archives: retirement

More Older Canadians Will Strain Federal Finances

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Statistics Canada has some good news to report:

Canadians are now living longer according to Statistics Canada. For those born within the last two years, life expectancy has increased by more than two years, as compared to 10 years ago. The agency says much of the gains in Canadian life expectancy come from men, even though women still live the longest. Men’s life expectancy at birth rose by 2.9 years to 78.3 in 2005-2007. Among women it increased by 1.8 years to 83.0.

Life expectancy among seniors is also on an upward trend, as it has been for several years. The average man who has already made it to the age of 65 could expect to live an additional 18.1 years in 2005-2007. That’s an increase of two years from the previous decade. A 65-year-old woman can expect to live an additional 21.3 years, up by 1.3 years.

It may be good news, but it may create real problems for the total budget. The office of Parliamentary Budget Officer Kevin Page reports that the Aging population will soon strain federal finances.

The government faces a renewed battle with the provinces over health-care cash as Canada’s greying population puts an increasing strain on federal finances in the coming decades. … It is a battle that will also be fought along generational lines, as public services for Canadian seniors account for a growing proportion of federal spending, leaving working Canadians to pick up the tab even as their living standards shrink.

In the future, population aging will move an increasing share of the population out of their prime working-age years and into their retirement years. An older population puts increased spending pressures in areas such as health care and elderly benefits. In parallel, slower labour force growth will restrain growth in the economy and in the general tax base from which the government collects its revenue.

If health-care transfers are allowed to increase at the current rate, the federal government would have to raise taxes or cut spending by nearly $30 billion in the next budget to keep Canada’s debt in check.

Another factor is that the national fertility rate has fallen from a peak of 3.9 children per woman at the tail of the “baby boom,” to 1.5 children per woman now. Coupled with the longer life expectancy by 2019, individuals over the age of 65 are expected to account for more than a quarter of the population; and by 2029, more than a third.

This puts incredible pressure on the Federal parties as they consider the next federal budget.

The Conservatives are promising to “stay the course,” and will keep cutting corporate taxes. This will lead Canada into even deeper deficits. The NDP would prefer that Canada’s seniors are helped out of poverty with improvements to the Guaranteed Income Supplement (GIS). This is unlikely to get support from the major political parties. Since Liberal and Conservative governments started cutting corporate taxes 10 years ago, individuals are carrying 61 percent of the cost of government programs, while corporations now pay only 15 percent.

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The Montreal Ponzi Schemer Gets Justice

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Earl Jones gets an 11-year sentence for orchestrating his massive fraud scheme.

Victims of the Ponzi schemer had hoped he would get the maximum 14-year sentence but a deal reached between prosecutors and his attorneys agreed on the 11-year sentence. Since he can apply for parole after serving one-sixth of his sentence that means he could be released from prison after 22 months. Many victims who have seen their future destroyed wonder how such an evil fraudster could possibly be spared the maximum sentence allowed by the law.

Earl Jones pleaded guilty last month to running a pyramid scheme that started in 1982 and included at least 158 victims, including several close friends and relatives. The Quebec court Judge Helene Morin was extremely harsh on Earl Jones in her remarks Monday. “Some victims call him a liar, a demon, a parasite, a snake, a financial predator and a social sociopath, as he promised them that their money was not only to be safe with him but growing.”

Many people had trusted Earl Jones but perhaps the most devastating case was that of his brother, Bevan.

Jones’ brother said he never wanted to speak to him again and would never forgive him.
“None of us will ever be the same,” said Bevan Jones who, along with his wife Frances Gordon, was fleeced out of $1 million.
“You work all your life, you sell your printing company and now we live on our government pension,” Bevan Jones said.
“Everything we saved up for and worked for is gone, ruined, by this little … I can’t say the word.”

The judge made sure that Earl Jones understood that his victims are not just suffering financially: she said all have suffered from insomnia and many have seen their health rapidly deteriorate. Some who took pride in never having taken medication are now on anti-depressants.

Jones has been shunned not only by his friends and relatives, but his wife Maxine has also filed for divorce. Jones once lived in the lap of luxury, but recently, he lived anonymously in a suburban rooming house and was penniless apart from a government pension.

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Most Seniors Need Better Pensions

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Even seniors who have done careful planning may be finding that their retirement plans are under severe pressure. Seniors are living longer yet savings may have been eroded by the severe depression. It was not surprising therefore to see that governments are reacting to these seniors’ concerns.

In December there was talk that Ontario was ready to consider a mega-pension plan.

Ontario is prepared to discuss every option to increase retirement income and broaden pension coverage, says Finance Minister Dwight Duncan – including an expansion of the Canada Pension Plan. He was meeting with fellow finance ministers to review research by Alberta economist Jack Mintz that was commissioned by Ottawa, as well as research done for Ontario by Bob Baldwin, a former researcher for the Canadian Labour Congress. Discussion of their reports will set the stage for further study and public consultations leading up to Council of the Federation meetings with premiers in the summer of 2010.

Fellow finance ministers from British Columbia and Alberta have been openly pressing for a national pension arrangement either linked to, or running parallel to, the Canada Pension Plan (CPP). However proposals for some form of mega-pension plan have raised the hackles of bankers and insurers.

Now Terence Corcoran is suggesting that the Canadian Association of Retired People (CARP) is over-reacting.

The implication is that the vast majority of Canadians are heading into retirement nightmares and need to be bailed out by another government income redistribution system — an implication that is not borne out by a half dozen studies recently commissioned by Ottawa. In a recent report on the studies assembled by Jack Mintz of the School of Public Policy at the University of Calgary on behalf of Finance Canada, the Canadian pension system looked far from being a nightmare. The studies found Canada’s pension system to rank well above the OECD average in terms of providing income security and replacement for the vast majority of Canadians. There are certainly gaps, although exactly where those gaps are remains an unresolved issue.

Susan Eng, Vice-President, Advocacy, at CARP disagreed with the tenor of Terence Corcoran’s article:

Mr. Corcoran argues that there is no need to fix Canada’s pension system. Leaving aside his opinion about the messengers who call for change – including one of Canada’s premier business schools with whom CARP is proud to keep company – the essence of his argument is that the experts engaged by the federal government think that Canada’s pension system does well enough for most.

But what would he propose for the rest? Even his Mintz report identified a significant number of people who are not saving enough. Anyone retiring without savings or a workplace pension is expected to live on $16,000 to $19,000 consisting of OAS and CPP/QPP topped up by GIS. That is fact, not rhetoric.

For those seniors, that is a very bleak and possibly a very long retirement future.

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Seniors Often Need An Ombudsman

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Seniors often may feel the need for someone who can help them in standing up for their rights when dealing with large corporations. Finding who can address your concerns in a satisfactory way becomes increasingly difficult when everyone is trying to push you to their website or insists you navigate their electronic telephone system. Thankfully some corporations take their responsibilities towards their customers seriously and are providing that much needed support.

A recent case with the Royal Bank illustrates what can happen. Seniors are living longer and becoming more educated, and this is forcing bankers to sometimes think outside of the box.

For example, a man in his late 80s went into a branch and asked to take out a five-year mortgage. He was in good physical and mental health, but the bank refused to commit him to a five-year loan that had a penalty for early termination. In this case, getting the senior his rights needed the help of the RBC Ombudsman.

Yes there is such a person: Wendy Knight is the RBC ombudsman. She was able to facilitate a resolution that kept everyone happy.

Banks are a group that is often criticized for poor customer service and the cell phone companies are on the low end of the scale too. Perhaps it is not surprising then that there is a Rogers Ombudsman, who is already making a difference. The company has now appointed its first ombudsman, Donald E. Moffatt. While he is supposed to act as a court of last resort, Moffatt will intervene quickly if he sees an injustice.

As ombudsman, Moffatt says he is independent from Rogers. He has no access to company records and has to ask for authorization from customers to check their files.

To get in touch, you have to go through three earlier steps, then send an email to [email protected] or send a fax to 416-935-3604.

One might hope that the training that customer representatives receive would eliminate the need for an ombudsman. That is clearly not the case yet. Until it is, providing an ombudsman means that you can hopefully get a hearing even if it takes some effort to achieve that.

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The Pension Crisis

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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’:

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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UK Frozen Pensions Case Returns To The European Court Of Human Rights (ECHR) on September 2

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The International Consortium of British Pensioners (ICPB) had decided earlier that they would appeal a negative decision on the Frozen UK Pensions case and move to the 17-judge ECHR Grand Chamber. This appeal will now take place on September 2.

An article in the UK Telegraph outlines the case well. It is titled How saving the pound led to 54 years of injustice.

The real question is whether the appropriate resolution for these Frozen UK Pensions , should be deternined by legality, equity or morality. If it were based on equity or morality, then most observers agree on the outcome. Instead the UK Government has chosen to treat it only as a legal question and so far the answer has been no. Perhaps the ECHR on September 2 will come to a Yes view as the chairman of the earlier ECHR hearing did in his dissenting opinion. Some 500,000 UK pensioners around the world are watching with bated breath.

Other References

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US Seniors Stay Younger Than UK Seniors

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US pensioners are mentally ’10 years younger’ than those in England.

American pensioners are mentally 10 years younger than their English counterparts due to better education and quality of life.   Researchers found that Americans had better memories, were quicker witted and were generally smarter than their English counterparts. And the older the pensioner, the greater the difference.

Researchers from the Peninsula Medical School, the University of Cambridge and the University of Michigan have carried out the first international comparison of cognitive function in nationally representative samples of older adults in the US and England.

The study compared 8,299 Americans with 5,276 British seniors aged 65 and older. The same cognitive tests were administered to the two groups in the same year. The US advantage in ‘brain health’ was greatest for those aged 85 and older. On a population level, the overall difference in cognitive performance between the two countries was quite large and amounted to a decade of ageing – the cognitive performance of 75-year-olds in the US was as good, on average, as that of 65-year-olds in England.

U.S. adults reported significantly lower levels of depressive symptoms than English adults, and this may have accounted for some of the U.S. advantage in ‘brain health’ since depression is linked with worse cognitive function.

The research team also found significant differences in alcohol consumption between the U.S. and English seniors. More than 50 percent of U.S. seniors reported no alcohol use, compared to only 15.5 percent of English seniors. Previous research has shown that moderate alcohol consumption, compared to abstinence, is linked with better cognition among those aged 50 and over.

US citizens tend to retire later than those in England, and this too can have an effect on cognitive performance – there may be a connection between early retirement and the early onset of cognitive decline.”

Dr David Llewellyn, one of the researchers, added: “With the population of the world ageing at a rapid rate, future cross-national studies regarding medical and social factors and ageing can only make significant contributions to the quality and delivery of public health.“

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Retirement Planning – Pensions Galore

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Herewith without comment: Glenys and Neil Kinnock have six state pensions – Times Online.

GLENYS KINNOCK, the new minister for Europe, has amassed six publicly funded pensions worth £185,000 per year with her husband Neil, the former leader of the Labour party. They have already received up to £8m of taxpayers’ money in pay and allowances, he as a European commissioner and she as a member of the European parliament.

The pair are already drawing payments from three of their taxpayer-funded pensions. Glenys Kinnock, 64, soon to be elevated to the House of Lords alongside her husband, is collecting a teacher’s pension and from next month is entitled to another from Brussels with an estimated annual value of £48,000.

Lord Kinnock, 67, is receiving one pension as a former MP and a second for his service in Brussels, together worth more than £112,000. Glenys Kinnock is simultaneously drawing a ministerial salary of £83,275. Her job entitles her to a further ministerial pension.

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Second Career Or Sixth Career

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As we all live longer and healthier lives, many cannot wait to ‘retire’ and move on to a second career.

If you need any inspiration for that, check out the Vancouver Sun Profile of B.C. Supreme Court Chief Justice Donald Brenner, who has resigned after nine years at the helm of the province’s senior trial bench.

At 64, Brenner could have continued sitting until 75, but he said he was looking forward to new challenges.

After 17 years as a judge of the Supreme Court of B.C., including the last nine years as chief justice, I have decided it is now an appropriate time for me to step down. I will be leaving our court on Sept. 7, 2009. I’ve had five careers, I think. It’s time to reinvent myself again.

Among other things Brenner was at one time a commercial pilot with Canadian Airlines. He is setting a great example for us all.

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Retirement Planning Faces A Perfect Storm – HSBC

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An HSBC Insurance study reveals that as far as pensions are concerned, a ‘Perfect Storm’ looms for an unprepared world.

A number of factors are in play:

  • Demographic, individual and financial elements are poised to derail people’s retirement plans unless they prepare properly now.
  • People’s short-term survival strategies in the midst of this recession are creating a serious long-term pensions ‘downturn deficit’.
  • This all is occurring even though people are aware that they are likely to live longer.
  • It is made worse by poor levels of financial understanding, education and access to advice
  • People are more concerned with protecting their possessions in the short-term than ensuring they can look forward to a financially secure retirement

Stephen Green, Group Chairman of HSBC, said: “The ‘preparedness gap’ reveals that families need greater support and guidance to effectively handle their finances, not simply in schools and colleges but through ‘trusted advisers’ providing professional financial guidance. The cost of procrastination is likely to be high.”

More specific advice can be found on the HSBC web page on Planning For Retirement.

As Jonathan Chevreau points out Canada is affected by the aging trend that is occurring worldwide. HSBC projects that between 2010 and 2015, the number of dependent adults in Canada will pass the number of dependent children for the first time, a crossover point which will arrive much earlier compared with emerging economies.

To better cope, 48% of Canadians and 55% of Americans would like to see further tax relief on savings. 16% of Canadians think the retirement age should be raised and more support be provided to those who choose to work longer.

28% of Canadians viewed debt as a key obstacle to saving more. Many are trying to create a “buffer” of savings by cutting back on both large and small purchases while also paying down debt.

Nevertheless it is clear that many people will struggle to make ends meet when they come to retire, unless they urgently review their priorities and planning and have the means to make adjustments..

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