Monday, April 02, 2012

Canada's Conservative Government Pushes Pennies On Pensions

I grew up in a household where retirement was a foreign word, even though my grandparents were essentially all retired. Work, being productive, feeling needed, are what give life energy. And so retirement never was in my plans (being forcibly retired at 37 by a brain injury is something I continue to fight to reverse). However I do understand why people want to retire: bad jobs, backbreaking work, etc.

Yet even given that, the Federal government's decision to move up the retirement age from 65 to 67 seems bizarre to me on many levels. First off, according to the Parliamentary Budget Officer, Canada and the Old Age Security (OAS) pension are in good enough economic shape that the baby boom bulge won't drag Canada into a recession by keeping the retirement age at 65.

"Under the baseline assumption that there is some additional enrichment to elderly benefitpayments, PBO estimates that the federal fiscal gap is -0.4 per cent of GDP." (Federal Fiscal Sustainability and Elderly Benefits, 8 February 2012)

That doesn't seem as huge a gap as the Conservatives maintain it will be. I mean why are they getting into a kerfuffle over a -0.4 percent gap caused by the elderly poor growing larger in number when before the recession they sent the surplus into oblivion and since the recession hired tens of thousands of public servants, about one-half to two-thirds of which they intend (haven't yet) to fire?

Second, if the gap is going to be a problem, why only two years? Seems a bit feeble to me. They state that longevity has increased a lot in the last fifty years, when the retirement age was set and set at 65. So 70 years would seem a more fitting age to set retirement at. Perhaps they want to be seen as doing something while not actually making that big a diff.

Third, they have put off implementing this so far into the future that another government, even after two elections, could come along and change this back to 65. Apparently, it's to give people enough lag time to prepare. Still, the Conservative Feds could implement it now just by raising the cut-off for OAS while sticking to their decision of who gets hit with the new retirement age. That way, future governments would have to work harder to reverse the process. Again, are the Conservatives serious? Or simply puffing their chest out at their base while not doing much?

Fourth, some maintain the Conservatives are now splitting Canadians into baby boomers against young people. Ha! The cut-off is between the older, nicely off baby boomers who vote and the biggest population bulge of boomers who've had to fight harder in the job market since graduating high school because the older boomers hogged all the jobs plus the young. When people talk about how difficult it is for the young to get jobs, save for retirement, prosper in this global recession, I think "been there, done that, and yeah it sucks, but this generation of young aren't the first ones to experience that." The thing is that a longer life span and the chance to work through different jobs in addition to personal fiscal prudence in the early years (like my parents' generation too) means that eventually you do catch up and have a better chance at catching up than previous generations, brain injuries notwithstanding.

And fifth, the Conservative government didn't solve the biggest problem with the OAS: it's puny. As my mother said if she had to subsist on only her CPP plus OAS, she'd be buggered. She cannot conceive how people can live on such tiny, tiny incomes, and I cannot conceive of how they don't fall into despair. I have not heard much discussion about seniors living on CPP and OAS, only that if you need OAS then you're in the very low income category. What will that mean for our country when numerically that portion of the population increases substantially? At a minimum, we know that age plus poverty equals a potently expensive health care cocktail. Yet that isn't being discussed much.

The Conservatives launched some sort of public private pension scheme awhile back. I must admit I didn't pay attention to it because my retirement saving days are over. But I did wonder then, and do now, why the Conservatives didn't just beef up CPP and launch an education program to tell the self-employed that CPP is a good thing for you because it's both disability and retirement in one. One well-managed program beefed up is less bureaucracy and simpler for people to understand and deal with. I mean, between RRSPs, tax credits, tax-free savings plans, CPP, the new pension scheme, and so on, just how many things must we juggle around in our heads come tax time? Why did the Conservatives think complicating our financial lives would make us save better for the future and improve our productivity now?

Meanwhile Finance Minister Jim Flaherty must discuss with his fellow Conservative Party of Canada MPs the idea of gently moving their retirement age from 55 to, well, something a little older, after they all got red in the face at the very idea of not receiving their pension till 65. They were a little mollified at not having to contribute 50 percent to their pension plan till after the next election. Still, no retirement income till 65? Incredible! Flaherty wouldn't even address cutting or moving back the Prime Minister's extra $100,000+ pension plan, noting eagerly instead on The West Block that the Governor General's income would now be taxed. Nice to know our GG, even if our PM isn't, is prepared to be fiscally restrained.

You see, this is only one small reason why I don't believe Conservatives are the fiscally prudent parties in Canada.

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