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VIEW: Flaherty sabotaging doable pension benefit increases

Toronto Star columnist Martin Regg Cohn writes about today’s meeting between federal finance minister Jim Flaherty and the provincial finance ministers near Meech Lake, Quebec. He notes that after a year of consultations with their provincial counterparts, federal officials have recommended a modest expansion of the Canada Pension Plan (CPP) in a 30-page discussion document. The columnist chastises, “The real scandal is that concrete reforms are finally within reach. Yet Flaherty seems determined to sabotage the process.”

By the numbers, “CPP pays only 25 per cent of the average industrial wage (currently about $50,000) — capping pension payments at a mere $12,500 a year. …(The discussion paper says) we could raise the CPP’s ‘replacement rate’ from 25 to 35 per cent of current income. And we could boost the eligible earnings ceiling from $50,000 to about $75,000. Doing so would go a long way to narrow the pension shortfall (estimated at an average of $6,200 per person a year) — the amount by which retired Canadians will be unable to meet their needs annually. …Instead of limiting CPP payouts to $12,500 a year currently, middle class Canadians could effectively double their annual pension down the road — virtually wiping out the shortfall in savings. This could be achieved with a relatively modest increase in premiums of about $1,000 a year for the highest-paid employees (employers would pay half of the cost through payroll taxes), or about $540 a year (cost-shared with employers) for workers earning about $50,000 a year.”

“Currently, Canada allocates a mere 5.5 per cent of its economic activity (GDP) to social security and payroll taxes. If all the improvements outlined in the paper were phased in, the percentage would rise to 6.3 per cent. Even under this improved scenario, Canada’s contributions would still be low by OECD standards — and remain at the very bottom of the G-7 group of industrialized countries.”

The Council of Canadians supports the call from the Canadian Labour Congress that CPP retirement pensions should be doubled over a 7-year period and that the Guaranteed Income Supplement of Old Age Security pensions should be increased by 15 per cent so that no senior lives in poverty. Cohn writes in his column that, “(The recommendation to be discussed today) still falls short of union demands for a doubling of CPP payments, but it is a worthy starting point.”

The column can be read at http://m.thestar.com/news/canada/article/1302903–time-to-put-flaherty-on-the-spot. For more, please read the campaign blog, UPDATE: Council calls for increased pension benefits as finance ministers meet at Meech Lake.