Saturday, January 28, 2012

What About Canadian Pensions Needs To Change?

Stephen Harper's recent announcement that Canada's pension system needs an overhaul elicited an angry response from a number of different groups. Today I'd like to ask two poll questions: 1) Should the age of pension eligibility be slowly raised from 65 to 67? 2) Should public sector pensions be scaled back (including those of MPs)? The proposal that civil service pensions be reduced drew the ire of the usual suspects; while the suggestion that the retirement benefit eligibility age be raised produced criticism from across the spectrum. It would be very interesting to see how parliament would vote on legislation to reduce their own pensions. The NDP would surely vote against it, and the Conservatives could certainly gain significant respect for passing that bill.

Regardless of the changes, the government says they will be "grandfathered in" over time, not affecting those currently retired or nearing retirement age. The Tories are looking at the longer term, with Canada's population over the age of 65 expected to nearly double in the next 20 years. Canada currently spends %2.4 of GDP on Old Age Security, which is decent considering Italy spends %14 of GDP on public pensions.

I'm 32 years old. My greatest concern is what's going to happen when I turn 50 and 30%-40% of the Canadian population is retired. If we don't make some changes, we're not going to be able to pay for that.


  1. It's called "save your money". Get "financially literate" and profit from your investment decisions, something your public school education system should be teaching instead of "social justice/social engineering".

    Learn math, the science of compounding, profit margins, fractions, percentages, yeild, inverse yeild, take the Canadian Securities course, learn about inflation and what it does to "fixed income" and the purchasing power of that currency you think is worth a dollar. Travel to the US, shop, see what it buys vs what the same item costs back home. Learn what "government legacy costs" are and kick your MP/MLA/MPP in the crotch every time they vote themselves and their employees a raise and pension benefits that exceed the rate of inflation and put you on the list of who to tax more to pay for it, so that government employees get "their fair share" of your labour.

  2. Read "The Wealthy Barber"!

  3. I do taxes in season. There are seniors who are living very comfortably, thank you, and those who are struggling. Anon @ 10:16, you have some good points but it's too late for my clients. Many of them have tried your ideas (shopping in the US is a bit tricky for anyone in the prairies, the North, or even northern BC and Ontario; the logistics aren't there), but chance and circumstance have prevented them from accumulating the needed nest egg.

    I think there should be more help for those in need, with more clawbacks of OAS for the others. After all, OAS was meant to help people such as my grandparents, who in their lives were not able - despite hard work - to accumulate wealth except by raising their children to go out in the world and do well. It was not meant for those whose work afforded them decent pensions or for those whose accumulated savings gave them a decent retirement income.

    To the seniors who will reflexively say "we're paid taxes, we're entitled", I reply "Nonsense". Except for CPP and - to a certain extent - EI, none of our taxes go to future costs. They go to pay current expenses. Further, I would accuse those seniors of gross selfishness, expecting their juniors - many of whom are already struggling - to finance their comfortable retirement.

    As I look towards the year when I, too, will retire, I look at our kids and their cousins. They're doing better than a lot of their contemporaries: a good (and practical) education, hard work, and a decent component of luck have seen to that. But they're not living lavishly, and they've families to support. I also see families struggling to keep going and give their children opportunities. If I can maintain a decent standard of living in my declining years, it would be wrong to expect young families to do without so I can have the extra $6368.25 (2011, more in 2012) to finance a more expansive lifestyle.

  4. Frances, I too am an accountant that does income tax. One of the things that often bothers me is that some seniors will not only feel entitled the OAS and GIS, but some will actively plan their affairs to maximize their GIS, even if it means foregoing interest from a bank or financial institution. I've seen seniors receiving more pension than they should be getting merely because they left their $200,000 in savings in their chequing account earning no interest in order to maximize what's essentially a welfare payment.

  5. I did taxes once, too. I do something else now.

    With regards to OAS, I don't disagree with eliminating it from certain economic cases, not in the least. I do object to Financial Planners who do include OAS in their calculations and don't explain that OAS is a supplement to that poor cousin that we do pay into CPP, thereby people will "plan" to spend that portion of after tax income, rather than save and invest it to cover off OAS's eventual demise.

    Government employee pensions are run better than CPP ever will be, because initially it was a Peter pays Paul plan, completely inadequate as a "pension" and certainly no "plan".

    Bought a lot of votes, though.

  6. isn't it kind of stupid for the pm to announce domestic policy like this in switzerland?

    1. Considering that Europe is more f**ked than we are and our economies are closely linked, so frankly I think that was a message that our European allies needed to hear.

      Thank you, I have the subject for my next blog post. Paul Dewar was bitching about this in the 50th set of NDP leadership debates today.

    2. It was wired for Harper to talk about domestic policy in an international forum. Harper has nothing to contribute internationally. It is solely to think that world leaders need to hear that sharper is musing about shafting Canadians by delaying OAS to age 67. Why would the president of Germany or France need to know that. Thanks for the laugh, you are partisan to the point of embarrassment.

    3. Oh, I'm sure the PM wasn't talking to Germany. His words were most certainly directed at Italy, Greece, Spain, probably Portugal too.

      And thank you for visiting!

  7. What they are not telling you is that the pensions paid to civil servants does not come out of Canada’s general revenues. The pensions are paid from an investment fund accumulated from investing the premiums deducted from the workers Pay Cheques as well as the employer’s contributions – this is a negotiated benefit. “Scaling back” the Public Sector pensions would save the Government no money at all. The fact is the Government took 30 billion dollars from the pot these pensions are paid from because some half wit in the Government said “they don’t need it” – is the Government now saying they were mistaken and the pension fund does, in actual fact need that money? I don’t see them jumping to give it back.

    Do not kid yourself – the Government would never vote to diminish their pensions. In fact, I can see them taking from the people who actually work to serve Canadians and then increase their own benefits – they have done that before.