Expanding the Canada Pension Plan would be the most effective way to ensure all Canadian have adequate retirement incomes, says a report released Wednesday by the Canadian Centre for Policy Alternatives (CCPA).

The report, by pension expert and CCPA Research Associate Monica Townson, provides an analysis of the options for expanding the CPP in order to address Canada’s pension difficulties.

“There is now widespread concern that unless changes are made, a significant number of workers will reach retirement age without sufficient income to support themselves,” says Townson.

“Only 38% of workers have a workplace pension plan and private savings through RRSPs are woefully inadequate. The average amount held in RRSPs by those aged 55-64 is estimated at about $55,000.”

In addition, those Canadians with a workplace pension plan may not fully comprehend how much pension income they will receive in retirement.

A poll released Tuesday by global professional services company Towers Watson found that defined contribution pension plan members are overestimating the level of income their plan will provide in retirement.

CPP strengths

In comparison with other countries, Canada’s public pension programs provide relatively low replacement rates, covering incomes up to the level of the average economy-wide wage, the study notes. Comparable programs in other OECD countries cover income levels up to almost double the average wage in those countries.

The report says the CPP has certain strengths that make it most effective way to ensure Canadians have adequate retirement incomes.

“It covers virtually all Canadian workers, whether employed or self-employed, full-time or part-time; it is fully portable when workers change jobs; it is indexed for inflation; and it accommodates the different work patterns of women.”

“Expanding the CPP, whether by increasing the replacement rate or increasing the level of covered earnings, or both, would address the issue of coverage, security of benefits, and low cost of administration — all the key objectives of pension reform,” Townson concludes.

The CCPA’s views are not shared by newly minted Alberta finance minister Ted Morton.

On Tuesday, Morton, rejected proposals for a mandatory expansion of the CPP as a way to help retired people make ends meet.

Morton said a bulked-up CPP would only exacerbate the problems of today’s system and burden young people to support the growing numbers of seniors.

IE