Pension Reform of Pension Madness

I just want to say first that I’m not a pension expert. It’s one of my weaker areas of knowledge. So what I’m writing here is more my own feeling of common sense then anything really backed up by public policy analyses. That being said, I think CPP obviously needs to be reformed to help people save for retirement. This is a no brainer (it would seem). Some feel that the CPP is inefficient and that people should just be smart with their money and save for themselves and stop making the public fund their retirement. But hold on, there is a reason we have a publicly funded pension system. First off, we want our seniors, those who contributed to the buildings and maintenance of our country to have an affordable after-work life. We don’t want them to have to go on social assistance just to survive. They put in years and years of work and deserve to enjoy their retirement in peace and security. Secondly, a fully funded pension system, our CPP, is highly efficient and has been recognized as such many times. In fact, in 2010 Canada’s pension system ranked 5th out of 14 on the Mercer Global Pension Index. It was down one from the previous year. The MGPI measures using three variables: adequacy, sustainability and integrity. For ease of reading, I’ve included the graph below:

© 2010 CNW Group Ltd.

 As you can see, Canada’s overall value is, when rounded to the nearest tenth, in the 70′s. The next closest is in the low 60′s. Canada rates high in adequacy and integrity. The one place it doesn’t rate high, as anyone would have known, is sustainability. We have had an issue with sustainability issue for a while as we knew the baby boomers were going to swoop in and take all our CPP, but the Global Financial Crisis (GFC) has made sustainability an even bigger problem. This chart, however, doesn’t really tell us much except that a decline in asset values and an increase in government debt along with an aging population and increased need for CPP, the sustainability variable goes way down.

 So what do we do. We all know that the Conservatives would love to do away with the CPP in favour of private pension schemes. But the problem is that employer driven pension plans are going the way of the buffalo…these plans just aren’t profitable. I think companies would much rather see government’s take a hold of this needed public institution if only that it meant they didn’ have to.

 Here’s a scary fact: 34% of BCers are covered by employer based pensions. That number drops to 22% if you take into account private sector pension plans. That leaves 66% of BCers reliant on a pension system that doesn’t look to be changed anytime soon.

 Cross Posted at Progress Now!