According to a major international banking firm, “two-thirds of all the people in the world who have ever turned 65 years old are still alive today”!
This year here in Canada, the first of our post-War “Baby-Boomers” are beginning to turn 65, on their way to becoming the biggest generation of senior citizens in history. Are their retirement incomes adequate and secure?
Three-quarters of Canadians working in the private sector don’t have any employer-sponsored pension plan. Neither do they have enough private savings to maintain their living standards.
So they will have to rely on our public pension system – Old Age Security (OAS), the Guaranteed Income Supplement (GIS) for those on the lowest incomes, and the Canada Pension Plan (CPP) if they’re eligible.
Our publicly-sponsored plans compare favourably to those in other countries. Plus, for those who can afford it, there are tax-incentives to save privately through RRSPs or TFSAs. But only a fraction of Canadians actually do so.
So, many seniors face big pension deficiencies.
To fill the gap, the Harper government is promoting just one, single idea – something they call “pooled registered pension plans” (PRPPs). This, they say, is all that’s needed to solve the problem.
Experience elsewhere would suggest otherwise.
A PRPP is not much more than a Group-RRSP. They’ve been tried in countries like Australia. They’re not easy to administer. The banks and insurance companies running them charge large service fees. And their investment record is weak.
In fact, in Australia, pensioners would have been better off buying a simple government bond.
A better alternative in Canada would be a
Voluntary Supplementary CPP, avoiding fees and margins that private sector operators necessarily have to charge, taking advantage of the CPP’s superlative investment record, and relying on the fact that the CPP is actuarially sound and secure for at least 75 years.
