COMMENT: Pensions are not only a seniors’ problem – Part 2
In part one I wrote about the unjust decision to increase the eligibility age for Old Age Security (OAS) to 67 and a variety of options to save for retirement. There are also all sorts of self-help manuals and financial advisors who can give you a good advice on how to plan for your financial needs when you retire. (So far I haven’t seen anyone offering advice on how to invest if you cannot afford your basic daily needs.)
Many Canadians are caught in the middle, trying to care for their aging parents and for their young children. The Sandwich Generation is having a hard time balancing their own retirement needs in this economy with the rising costs of education and health care. To make matters worse, many Canadians lost their jobs during the 2008-10 recession. Some were able to cope on Employment Insurance income and find another job soon enough. Others were not so fortunate. Once their EI money ran out they had to dip into their savings and use their RRSPs at a loss because bills needed to be paid and their “temporary” unemployment lasted longer than they had hoped. The whole notion that employers have an obligation to help ensure a decent income after work is no longer the norm, although it used to be taken for granted just one generation ago.
Whether we are already there or think it is a possibility in the future, we need to consider whether we can afford our own retirement. This may depend on whether we plan to pay for our children’s post-secondary education and if we are, or will be, caring for elderly family members. As members of the Sandwich Generation, we will be affected by the financial security of our children and our parents.
It is imperative that we amend public policy on pensions. The recent trend among governments and companies to reduce their risk and the expense of workplace pension plans is leaving many seniors struggling to survive. The Canadian reality today and for the future of our children and grandchildren is that most Canadians simply don’t earn enough and therefore cannot save enough to retire in dignity. Wages for middle-income earners have not been adjusted for inflation for 25 years. One third of Canadian families do not have workplace pensions or private pension assets such as RRSPs.
Only 24 percent of Canadians contributed to an RRSP in 2011, according to the most recent tax data available, and they are paying very expensive management fees to the financial institutions handling their portfolios. Pool Retirement Pension Plans (PRPPs) are another voluntary option but it is doubtful that many employers would offer them to their employees. According to the Canadian Federation of Independent Businesses, two-thirds of their members would not consider offering PRPPs to their workers.
Expanding the Canada Pension Plan now is the most effective way to secure the future for today’s young workers. All employed and self-employed Canadians are already contributing to CPP, which is recognized as one of the best public pension plans in the world. If we gradually raise CPP contributions for workers and employers, the maximum benefits could easily be increased to a more livable level for present and future retirees.