Does Canada's pension system deserve a passing grade?
One year ago, Canada had the 5th best retirement-income system in the world. A year later, that really hasn’t changed much, according to the most recent study of worldwide pension systems by Mercer and the Australian Centre for Financial Studies.
The study measured the overall pension benefits that are being provided to the citizens of 16 countries, the likelihood that those systems will be able to provide benefits in the future, and the integrity of each country's private retirement plans.
And, same as last year, Canada scores decent but not overwhelming marks. In fact, Canada earned a low “B” grade for its pension-plan system, according to the 2011 Melbourne Mercer Global Pension Index, the same grade awarded to Sweden and the U.K.
The Netherlands and Australia earned the highest grades, a B+, for the respective pension schemes. Read the entire Global Pension report here.
Not everyone agrees that we're in "pretty good" shape, however. Thanks to the bankruptcies of high-profile corporations like Nortel Networks and AbitibiBowater, which left massive underfunded pension liabilities in their wake, some Canadians aren’t going to see the pension they counted on.
What's worse, recent court rulings supporting their cause, are being challenged in the Supreme Court.
The fact is that one out of seven senior citizens in Canada are living below or just slightly above the poverty level, according to recent Canadian Labour Congress data.
The problem is going to get worse as the baby boomer generation heads into retirement and the number of seniors in Canada increases, says the CLC's Barb Byers.
Realizing you're not likely to move to Australia, how do you feel about Canada's current retirement programs? Do you think things have improved in recent years?
By Gordon Powers, MSN Money
Posted by: Northern Ontario | Dec 6, 2021 11:36:53 AM
The words "passing grade" is a little harsh since we are in the top 5. I have 2 concerns that could have been addressed a long time ago.
1. why wasn't there proper legislation to force companies like Nortel to put aside pension money into a separate fund to ensure the money was still there in the event of a bankcruptcy? Once the money is in the fund, they don't have access to it. Once the fund gets below a certain level that would not cover all the pensions, they must infuse more cash into it just like the company would in infrastructure and equipment.
2. Forecasting is an essential part of all successful businesses. Our beloved government knew darn well 30+ years ago that we would have many more pensioners vs. the amount of employees paying into the plan. No reason why they couldn't make the gradual adjustments over time. I suppose it was probably political suicide. That's why we should just legislate changes now no matter what government is elected. They won't win or lose an election on this sensitive issue.
Posted by: Canuckguy | Dec 6, 2021 7:25:46 PM
Back in the 80's, companies were allowed to loot pension surpluses and were, if I am not mistaken, penalized if the surpluses got too large. Blame government short sightedness
Posted by: PENSIONER | Dec 7, 2021 8:59:10 AM
I feel that the Federal Gov't should cancel the politician's pension. They don't need that kind of pension plan after years of feeding at the tax-payers trough. The lucrative pension they have is ridiculous. Let's see what happens to CPP if the politicians only get this amount, but they have to pay into it for many more years than the 7 they serve now. If a party would run on this platform, would be a sure win. Who am I kidding, they won't as it would look bad for the corporations that back them. A good platform for the Green party.
Posted by: WF | Dec 7, 2021 9:23:47 AM
The rules for CPP changed this year, so you must pay in past 65 unless you opt out. There were other changes as well. I would assume this study did not include these changes as they are new. I also wonder how they account for the Quebec pension plan and if it works the same.
Posted by: Badger | Dec 7, 2021 10:59:25 AM
Pension plans are slowly becoming a benefit of the past. Young people have to be educated and encouraged to develop their own retirement savings plans very early in their adult life. Many people who thought they were going to have a pension in retirement neglected plan and save beyond that. When their pension plan went broke they were left out in the cold. Our governments need to develop programs that encourage long term planning and saving. Contribution levels for RRSPs and TFSAs should be increased.
Posted by: john penner | Dec 7, 2021 1:26:31 PM
the rent in winnipeg manitoba is about 1000 dollars a month ; i belive the average cpp check is between 500 to 600 a month; talking in regards to cpp' that the working class get
Posted by: Western Guy | Dec 7, 2021 4:02:23 PM
Does anybody young have any expectation that CPP will pay for their retirement anymore? Seriously? Why would anybody plan to rely on somebody else to cover their life expenses from 65 onwards? If it doesn't pan out you can end up starving. Personally I have every expectation that I will not receive a single dollar back from CPP and I have planned accordingly.
So be smart and save your own retirement funds. I'm 31 and my wife and I have been saving and investing since we started working. At first it was pretty small but now our equity is over 300K and is climbing faster every year. It is the result of a lot of hard choices which meant we had to sacrifice now to ensure our future.
I personally can't believe anybody would be so willfully descructive as to spend EVERY dollar they earn with the expectation somebody else will cover their retirement. If that doesn't magically pan out you get to freeze and starve in the dark.
Posted by: Northern Ontario | Dec 7, 2021 4:37:13 PM
@Western Guy and others who have the same views. While I generally agree with you that you should not count on others to pay for your pension, you must consider that the majority of citizens were simply not properly informed to better plan for the future. If you have a frank discussion with those in their 50's / 60's / 70's with a very good education, they will readily admit they would have done things differently if they had known the potential pitfalls they are facing now.
Everybody thought their company pension plan was guaranteed. If you talked to people 30-40 years ago about inflation, they simply shrugged and thought you were crazy. Economics was never on the agenda. It was commonplace to have families of 12 in the 30's/40's. Then it became families with 4-6 kids and now it's more like 1-2 kids. The Standard of living changed and it is very hard to predict the future .
Many are now getting informed which is why people are complaining they were hoodwinked. The world is no longer what you only see at home. The Global Market has changed everything and it will continue to do so very rapidly. What you now know at 31 is probably a lot more than what a 31 year old knew in the past. And guess what, in 30 years from now, a 31 year old will know a lot more than what you know now. It's simply Evolution.
For many, it's about survival now and not planning for what the future may bring us. I don't care if I am one of the lucky ones. I don't flaunt it. I try to exchange informative conversations with others so that common sense can be shared with others, to ensure people are in the know, to make informed decisions for themselves.
Posted by: Yes, but ... | Dec 7, 2021 5:07:05 PM
Western Guy ... Putting money aside at 31 is wise but my guess is you don't have kids, or at least not yet. Raising a family with even modest aspirations means that many people have to make a choice about now or the future. It should clearly be both but a few children spread over a decade will make that a challenge for many families.
Posted by: Jess4lukin | Dec 7, 2021 7:04:40 PM
Just a note about the MP's pension plan:
First, it's totally unfunded. That means they don't pay anything in to it. MP pensions come straight out of taxes. Benefits are paid when an MP retires or is not elected, providing the individual has served for a minimum number of years in office. I don't remember how long the qualifying term is, but I do recall a news article that said Mr. Harper - before the last election - qualified for some $175,000 per year.
Benefits are calculated according to number of years in office and positions held (Leader of the Opposition, Committee Chairman, and so on). There are no mechanisms for public input to pay plans or pensions of elected officials. Both are presented to parliament by committee. To my knowledge, the recommendations of that committee have never been rejected.
Remember, this pension is paid after his term of "public service" during which the elected official received a large part of his salary tax free and, of course, any other government perks he may have been able to access.
All in all, it's a pretty rich plan. I'm not making any comments about it because I think the facts speak for themselves.
Posted by: an old guy | Dec 7, 2021 11:41:21 PM
The bad news about the new amendments to the CPP are not well known or publicized. If you are 60- 65 on Jan. 2012, you will be REQUIRED to contribute again if you are still working. if you make $30,000 a year, you will be contributing $1485.00 per year.(4.95% of pensionable earnings). If you apply for, or are receiving CPP benefits at this time, the increase will amount to somewhere between $140.00 to $180.00 per year. Depending on how long you contribute, chances are you will not live long enough to break even on the amount you contribute after age 60.
Posted by: Western Guy | Dec 8, 2021 11:11:37 AM
I'm amazed at the posters on here.
To Northern Ontairo: So people aren't liable for their plight because they were naive in the extreme in the past? Those same people have overspent their entire lives and now wnat a bailout from people that lived within their means (there are lots of elderly finanical stable people right now as well). Just because the grasshopper partied all summer doesn't mean the ants have to take him in and look after him. Its unfortunate but ignorance has consequences.
To Yes...but: At 31 I'm not starting to put money away. I started that at 22 to get the ball rolling. My wife and I are now planning to have children in the next 1-2 years. I find it amazing that you suggest people have to choose between children and future financial stability. My wife and I made the tough choice and waited for children till we could comfortably afford them. It has taken several years and a lot of work by both of us but we are there and are children will receive nothing but the best upbringing available and we will still have a very well stocked retirement plan.
Children and retirement are not an entitlement. You have to work hard to earn the right to both (with the obvious idea that if you don't plan and work hard you will have neither). Having children when you can't guarantee their upbringing and your future financial well being is ludicious. If you can't afford children then wait to have them. If you never can afford them then obviously its a bad idea to have them. I grow so weary of people that think society owes it to them to allow them to do what they want regardless of the economic consequences. Where is the responsibility for ones-self? Why should I have to pay for your bad decisions?
Posted by: Northern Ontario | Dec 8, 2021 12:14:31 PM
@Western Guy. I am not picking a fight. You have valid reasons but show no compassion to others that might not have been as blessed as you with your proper planning. If it was that easy, everybody would make all the correct decisions. A freedom society doesn't work that way. (Too much to get into in a blog).
In our society, the disparity between the rich and the poor is to wide of a gap. While I am in the top 5%, I have done so because of the employees I have on staff. Is it right that I am financially well-off and some of my employees seem to just get by for whatever personal reason? Too many employers have the attitude that if you don't like it here, there is a line-up of others who want this job. BULLSHIT! How much is enough? I pay my employees above all others in the same industry and the results are extremely good. Could I make more money, of course, if I chose to pay them less. Morals come into play.
As I refer to my parents, they had 4 kids and my father earned a good income as a miner for 38 years. They put food on the table, roof over our heads, summer holidays camping, did what they could for post secondary education and provied unconditional love. No foolish spending. Probably a very typical family. Are they surving now with a modest pension, CPP and OAS - All on $3100 mth with no savings? No problem. But that's because they have a $1100 company pension plan they can count. Many families don't have that. Those with more can easily help those with less. Yes, with some restrictions. Don't respond back by saying you already pay much more taxes now. It's all relative to income.
Posted by: Trixie | Dec 9, 2021 10:31:54 AM
Northern Ontario, I couldn't have said it better. Thankyou. (However, over 60% of taxes are for a health care system that needs fixing badly. That is another topic.)
To Western Guy, YOU are definitely in a new generation. That is good. You are obviously doing well. You say, don't rely on the gov't. I actually agree with you on that. However, what you are saying is, DON'T TRUST anyone outside of your own circle. I agree with that also, right now. I hope that changes for the better in the future. (Mr. Harper just set up a plan to make sure the CPP DOES exist for decades to come...if anyone was worrying.) If this plan doesn't work...the rich will be living in compounds, surrounded by gates, alarms, dogs and security dogs. The poor will be begging on the streets. Yes, if you have money, you can pay for all this. However, remember, you can't set a price on peace of mind. Poor, destitute people don't care. Someday, with your millions in your miion dollar house, would you like to walk out and get shot and killed in a split second by someone who is bitter and just simply doesn't care?? Wait a minute...I think I"m talking about what it's like to live in a second world country. Do you want to live like that? I don't. Think about it.
Posted by: Norm Wood | Dec 12, 2021 3:13:02 PM
I think not for the passing grade. I spent 23 years in the military and received a pension when I retired. I reached the age for the old age canada pension when I reached 65 years of age, and found out that I was intiteled to have a $300.00 claw back by the Canadian government from my military pension.That claw back amounted to, $3600 a year, totaling to this date a loss of $25,000.00. This amount may not seem like much to those people who we elected to run our government on our behalf, and getting a full over priced pension with outragious anual raises yearly which they receive after seldom serving a complete of the house sittings for a full year. Their pensions should be removed and the money diverted back to the people who earned it leagaly throug years of service for their country, and a lot of teh died while doing it. It would be nicer to show us all respect instead of giving us the shaft.