Is expanding CPP best solution to "retirement crisis"?

The ongoing debate about improving Canada's pension system -- in response to what has been called a retirement income crisis -- continues with recent remarks by Ontario Premier Kathleen Wynne. At recent Ontario Liberal party events last week Wynne chided Prime Minister Stephen Harper for refusing to strengthen the Canada Pension Plan as a means to ensuring middle-class Canadians have adequate retirement income.
The prime minister is showing "willful and ideological indifference to the retirement income crisis," according to Wynne.
"It's somewhere between offensive and inexplicable to ask that people who have worked hard all their lives to be rewarded with a retirement that takes them out of the middle class."
Wynne said a pension income crisis has developed as a result of a decline in company pension plans along with a shift from defined benefit to defined contribution plans. Expansion of the CPP would solve the problem.
"But Stephen Harper has an ideological has an ideological aversion to the CPP, so there is no federal leadership in this area."
As a result, Ontario is working on its own plan to enhance retirement income. Prince Edward Island and Manitoba are also looking at options. Alberta's government has rejected CPP enhancement and is not currently projecting its own pension scheme.
The adequacy of the current retirement income system, the desirability of expanding CPP and other possible options are also the subject of three recent reports that come to differing conclusions.
The country's retirement income system is failing Canadians, states a study by the Canadian Centre for Policy Alternatives.
In Risky Business: Canada's Retirement Income System, author Hugh Mackenzie strongly criticizes RRSPs as a retirement savings vehicle because of their high fees, lower returns and the fact they are mainly utilized by higher income earners. The Pooled Registered Pension Plans (PRPPs) introduced by the federal government suffer from the same defects, he says.
Mackenzie says that expanding the CPP would be the best way to provide for retirement income because management costs are lower, longevity risk is taken care of and better returns can be generated.
"The Canada and Quebec pension plans are among the largest and most successful pension plans in the world," MacKenzie has said. "That is not cause for complacency, but it is an opportunity. The next phase of pension reform must build further on that solid foundation."
Risky Business: Canada's Retirement Income System is available on the Canadian Centre for Policy Alternatives website: http://policy alternatives.ca.
A report from the C.D. Howe institute that particularly addresses the Ontario situation recommends a so-called "middle way" between CPP expansion and reliance on PRPPs.
Author Keith Ambachtsheer notes there is general agreement that Canada has a pension coverage problem. However he does not favour CPP expansion (also referred to as "Big CPP") because it would be mandatory and future generations might be required to fund pension payouts if assumptions about invest returns are too optimistic.
His solution, based on a nation-wide proposal he made in 2008,  is a supplementary pension plan that employers would have to provide, while allowing workers would be to opt out. Rather than a definite pension income, plan members would have a pension "target," with actual payments varying on the basis of investment results.
The report,  Helping Ontarians Save for Retirement: How the Province Could Adapt the Canada Supplementary Pension Plan, is available at www.cdhowe.org.
In a paper published by the School of Public Policy at the University of Calgary, authors Kevin Milligan and Tammy Schirle examine four proposals for increasing retirement income.
They indicate that common plans to expand CPP would likely not benefit individuals making less than $50,000 annually because reductions in Guaranteed Income Supplement payments.
Their proposal is to double the cap on the maximum income covered by CPP from $51,000 to $102,000, which they argue would achieve the desired result without undue complexity.
The authors raise the question of whether retirement income shortfalls faced by relatively of well-off Canadians are really a question the government needs to deal with. However their conclusion suggests that it is.
"Decisions about saving are complicated, irreversible and vitally important," they state. "Leaving people to make these decisions on their own will result in some proportion of the population  choosing poorly and ending up in a dire position in their last years. If government has some responsibility for alleviating personal decision-making failures, a modest expansion to the CPP might be justified on those grounds."
The report, Simulated Replacement Rates for CPP Reform Options, can be found at www.policyschool.ucalgary.ca.

Seniors' care faulted in throne speech responses

Not a lot was said about seniors in the Alberta government's speech from the throne earlier this week. In the speech given by Lieutenant-Governor Donald S. Ethell at the March 3 opening of the second session of 28th Alberta Legislature, the government congratulated itself for building a seniors' care home in Strathmore.
It also stated the government will "invest in better seniors' care, focusing funding on aging in place and on innovative new technology that allows patients to recover in their own homes," and said Crown land may be made available for new continuing care centres.
However, in their responses to the throne speech in the legislature, several members of the opposition parties had plenty to say, honing in on current deficiencies and setting out how they would do it better.
"Well we don't have to look back on what's happening to the seniors in our province or some of the horrible, horrible things that we've seen," said Heather Forsyth, Wildrose MLA for Calgary-Fish Creek. "The government doesn't seem to understand that the fact of the matter is is that while we appreciate what they're doing in continuing care spaces, we have seniors in this province that need to be in long-term care nursing beds."
Forsyth noted that people such as Dr. Paul Parks had frequently spoken out about the need for building long-term care nursing beds because not everyone fits into the continuing care model.
"I saw that with my own mom, who was in a continuing care facility and ended up in the hospital," she said.
The MLA for Rimbey-Rocky Mountain House-Sundre, Joe Anglin, also a Wildrose member, said he sees significant issues with the long-term care facility in Rocky Mountain House. Anglin pointed to understaffing that has resulted in residents being served cold food and not even being able to get the two meals a week to which they are entitled.
"What's happening here -- and to a T every one of the front-line healthcare workers in this long-term care facility…will testify that this now is an extreme example, and it's a critical situation, where proper care is not  being delivered," he said.
"The cutbacks have been too great," Anglin went on. "We have an imbalance in the system. I wish Rocky Mountain House was the only place, but it's not. We're seeing it elsewhere, in other places in the province, and this is a real issue that affects us."
As a result of government actions, increased healthcare costs are putting a strain on seniors and their families stated David Eggen, NDP MLA for Edmonton-Calder.
"We've somehow moved it out of the provincial budget, and so many more people are having to pay for care for seniors with assisted living and so forth. That price, that burden, is often more than families can afford.
Eggen believes however that care for seniors is not a drastic problem for society.
"We knew that the baby boom would be passing through our demographic for the last 50 years," he said. "It's arrived now, and with planning and with care we can build the public seniors' care that we require for these next number of years."
Seniors would benefit from major investments in healthcare under a New Democrat government, said party leader Brian Mason, MLA for Edmonton-Highlands-Norwood.
He said a plan for the $1 billion extra in federal health transfers Alberta will begin receiving next year would see the government investing in long-term care and home care and reducing prescription drug costs for seniors, along with supporting mental health care, and expanding medical and nursing programs.
According to Liberal leader Raj Sherman, Edmonton-Meadowlark MLA, a government he headed would bring in world-class home care, nonprofit community home care and lodge care and world-class nonprofit community-based long-term care.
"Alberta Liberals will bring in a drug plan so that seniors can afford their drugs, unlike the government who wants to bring in a drug plan that's a tax on the sick," he added. "If seniors can afford to get their get their drugs, they will actually stay out of the hospital system. We know this investment in a drug plan will improve their lives and save us money in the acute-care system."