With the provincial election writ only having dropped yesterday, it remains to be seen what issues will dominate the campaign in the weeks to come, but its probably a safe bet the Liberals proposed Ontario retirement pension plan will be among the topics up for debate by the parties.
The establishment of a new provincial pension plan was one of the key components of the Liberal governments now-defeated 2014 budget document. Under such a plan, retirees would see their existing Canada pension plan maximum annual benefit of about $12,500 supplemented with up to $12,815 more, for a maximum total benefit of about $25,000 annually.
The Canadian Association of Retired Persons (CARP) welcomed the move as being long overdue.
With the federal government refusing even a modest increase to the CPP, such action is necessary to ensure Canadians can expect a decent and predictable retirement benefit.
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CARP members have been calling for just such a plan for years because they know exactly what it takes to get by in retirement and a decent pension is a priority, CARP’s advocacy vice-president Susan Eng said. The proposed pension plan will benefit their children and grandchildren, not themselves directly, but it is a ballot question for them.
York University political science professor Thomas Klassen says some change is definitely needed to the existing public pension plans.
More people are reaching the age of retirement than ever before and not all have been able to save enough, he said, adding many Canadians are fretting about the adequacy of their savings, especially since Old Age Security and the CPP only guarantee a very modest income.
A pension plan is like any piggy bank and takes time to fill up before anyone gets payments, Mr. Klassen said. As such, workers would need to pay into an Ontario plan for at least a decade before being eligible for payments, so those near retirement will not get any payments, while younger workers, who will have saved under the proposed pension plan, will have more pension income.
Any pension plan gets money from employees and employers, invests the money and pays it back once the workers reach the age of eligibility, Mr. Klassen explained. However, employers ; or some employers and employer groups ; argue that making these additional contributions is a new tax, that some workers would rather have the money now than later and, as already noted, those near retirement will not benefit, he said.
Many older people are well off, especially those with uninterrupted careers and with employer pension plans, however, only one-third of Ontarians have employer pension plans.
The government of Ontario is rightly worried that those middle and low-income workers, who are not financially prepared for retirement, will add to provincial costs, such as for subsidized housing, not federal costs, he said. The better alternative, and the one the province would dearly like to see, is an expanded Canada pension plan.
Behind Ontario’s proposal is the failure of Ottawa and the provinces to agree on reforms to the CPP. The threat of an Ontario plan is a bargaining chip in the battle between Ottawa and many of provinces, including Ontario, that want to see enhancements to the CPP.
Reforms of the CPP require approval of most provinces and the federal government, Mr. Klassen continued. There is, as yet, no consensus on changes, with the federal government arguing higher contributions to the CPP by employers and employees will reduce job growth, he said, adding the plan for a pension enhancement coincides with the next federal election.
The best public pension arrangements are stable, predictable and provide for adequate retirement income for those most at risk of poverty in old age, he said. Rapid shifts or uncertainty in public pensions trigger greater anxiety among workers and employers and doubts among families preparing for retirement, rather than doing what pension plans are supposed to do: reduce anxiety and uncertainty.
Liberal Oak Ridges-Markham MPP Helena Jaczek stressed any provincial pension plan would not restrict people from continuing to invest for retirement on their own as well. The province had initially hoped the federal government would boost the CPP benefit, but given its refusal to do so, the province was forced to move forward with a plan of its own, she said.
We have the numbers and statistics that show Ontarians aren’t saving for retirement to the extent they need to in this province, she said. We also know 65 per cent of people dont have a defined benefit pension plan through their employer, which means they will need to rely on CPP.
That’s not enough to enjoy the kind of lifestyle you did during your working years.
Ms Jaczek acknowledges there is some resistance to the idea, including from employers who worry about the impact to their bottom lines, but she counters by saying the deductions wouldn’t start until 2017 at the earliest and that providing retirees with more income will give them more money to spend.
Richmond Hill NDP candidate Adam De Vita doesn’t disagree action is needed to boost the income of retirees and that’s why the NDP proposed pension plans of its own in 2010 and 2011, however the devil is in the details with these sorts of things and, at this point, the Liberals cant be trusted to deliver, he said.
Its kind of hard to believe them, he said. What we’ve been saying is that any plan that’s brought in has to be phased in slowly.
The NDP doesn’t want to see a plan brought in that would hurt businesses or further stretch household budgets, he added.
Speaking to the York Region Media Group Friday, Progressive Conservative York-Simcoe MPP Julia Munro was very critical of the Ontario pension plan, referring to it as a payroll tax that will take much-needed dollars away from individuals and businesses alike.