Finance Minister announces improvements to Canada Pension with a twinkle in his eye “sometime in the future”

Finance Minister Jim Flaherty, a Leprechaun on CPP reform?

Unless the government improves the Canada Pension Plan, most Baby Boomers will be retiring to a big drop in their standard of living. One third will be living in poverty.

The CPP is out of date. Everyone knows that except the CFIB who are looking greedier everyday on pension reform.

Flaherty held cross Canada public meetings on CPP reform and a just ended meeting of Provincial finance ministers in Charlottetown, PEI.

The outcome?  “We agreed to consider a modest phased-in and fully funded enhancement to defined benefits under the Canada Pension Plan,” Flaherty said with great charm and political finesse.

“A couple of ministers need to go back to their governments to have further discussions on that option, but we are going to go ahead and mandate our senior officials to work collaboratively on technical and implementation issues … and to complete this work by the fall,” Flaherty said.  “You know, what does modest mean? How do we go about doing this? Our officials have been tasked with that job.” CBC

Any reform to the CPP is expected to take up to ten years to implement and fall on some scale of nothing to modest.

The National Union of Public and Government Employees say one third of Canadians retire on $17,000 a year which puts them below the poverty line. Considering union members are likely covered by an indexed government pension, it’s kind of them to think of others.

The average Canadian has $65,000 in his or her RRSP which is virtually worthless. 40% of that will go for income tax and the rest will be taken in GIS claw backs. Unless your RRSP will be greater than $160,000 at retirement, you are better off to collapse it before retirement.  Your money would be better invested in real estate that is only taxed at half the normal rate.

CFIB opposes reforms

The Canadian Federation of Independent Business is dead set against any improvements to retirement benefits for their employees. “The Canadian Federation of Independent Business (CFIB) is disappointed that a majority of provinces have joined the Federal government in examining ways to increase Canada Pension Plan (CPP) payroll taxes. In a May, 2010 CFIB survey, a full 71 per cent of small firms opposed the idea of increasing mandatory CPP premiums.”

While the average Canadian family lives on a paltry $43,000, business owners and professionals earn almost 4 times that amount. ($154,000 in 2004 terms according the Statistics Canada). It is no wonder that Canadians cannot save more for retirement. They are barely getting by with high housing and other costs.

The CFIB is doing their job to protect the disparity between Canada’s richest citizens and those who work to make them rich. The CFIB is crying wolf on business costs and profits.  78% of Canadian businesses are profitable and wages only represent 5.9% of costs. (Statistics Canada) A modest increase in CPP contributions isn’t going to bankrupt anyone.

It’s time for the government to act and there are rumours that Prime Minister Harper is behind CPP reform. The need for consensus among the Provinces makes change difficult. Two thirds of the provinces that represent 67% of the population have to agree to any change.