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Hey Senior, Whats in your wallet?

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Hey Senior, Whats in your wallet?

Post by TomW on Thu Feb 02, 2012 12:19 am

Editorial: Not a pension crisis, but reform opportunity


By The newspaper's view, Vancouver Sun

We have pension challenges in Canada, but we do not have a crisis.

That distinction needs to be kept front and centre when we talk about both the adequacy of retirement income for Canadians now and the demographic changes that threaten the sustainability of our public pension system.

Stories in the news about the crisis in Europe might have led many Canadians to believe that the same dire conditions exist here. They do not. A comparative study done by the head of the social policy division of the Organization for Economic Co-operation and Development for the federal Department of Finance in 2009 concluded that “Canada does not face major challenges of financial sustainability with its pension schemes.”

To put the issue into perspective, the study projected that spending on public pensions of all kinds will increase from the current level of 4.5 per cent of GDP to 6.2 per cent by 2060. By comparison, the 27 European Union nations already were spending on average nine per cent of GDP at the time of the study.

Prime Minister Stephen Harper ignited a firestorm in Canada with his speech last week at the World Economic Forum in Davos, Switzerland, in which he listed the need for pension reform as one of the priorities of his government.

Tossed into the overheated political atmosphere in Ottawa, those remarks and the confirmation from Conservative House Leader Peter Van Loan have unleashed a torrent of unhelpful rhetoric from both sides of Parliament.

What Canadians need to hear instead is a rational discussion of the challenges facing our pension plans and the options for improving the outlook for the next several decades.

First, we do have demographic challenges. The chief actuary for the federal Old Age Security system estimates that as our population continues to get greyer over the next 40 years, the ratio of people of working age to retirees will fall from 4.4 to one to 2.2 to one.

All of the components of our Old Age Security system, which includes the OAS, the Guaranteed Income Supplement and survivors’ allowances, are supported by taxpayers. With fewer taxpayers of working age, the burden on those remaining will increase, notwithstanding that many retirees also pay taxes.

Without any changes to current formulas, the cost of Old Age Security is expected to increase from the current level of 2.3 per cent of GDP to 3.1 per cent in 2030.

All of which raises a number of crucial questions that we need to address in a national debate, rather than one that gets too easily hijacked for partisan advantage as we have seen already this week in Ottawa.

First is the question of sustainability. We can see that costs will rise over the next couple of decades. Do we need to cut those costs or should we look elsewhere to raise the funds necessary? In any organization, spending patterns have to change to meet changing priorities. In times of war, we spend more on defence. During the baby boom, we invested disproportionately in education. Do we need to simply accept the fact that as our population ages, we will have to spend more of our budget on pensions, leaving less for other priorities?

If we decide we have to cut the cost of providing public pensions, how should that be done? Rumours out of Ottawa suggest that the government is considering raising the age of eligibility from 65 to 67. That would certainly cut costs, but is that an equitable solution? Only people who depend on the OAS to stay out of poverty will have to put off retiring. Higher income earners, those whose OAS is already clawed back through their taxes, won’t be affected.

Should the government instead consider returning the OAS to its original purpose, which was to lift seniors out of poverty? Do we need what is in effect a national welfare program that includes seniors who earn more than the average household income in Vancouver? The clawback doesn’t start now until an individual earns $69,500. You can still get part of the OAS until it is fully taxed back at just over $110,000.

Lowering the threshold at which the OAS is taxed back would have the same effect on the bottom line as pushing back the age of eligibility, but it would still allow people to retire without fearing poverty at 65.

Rather than legislate a solution during the current session of Parliament, the government should publish a white paper that lays out the problem that needs to be solved along with a range of possible solutions.

Then an all-party committee should be charged with drafting reforms that can be assessed without the unproductive overlay of electoral politics that has derailed so many proposed reforms in the past. An equitable solution should leave no aggrieved interests for opportunistic politicians to champion.
© Copyright (c) The Vancouver Sun
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TomW

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Re: Hey Senior, Whats in your wallet?

Post by booboo on Thu Feb 02, 2012 12:52 am

well ya know if the Feds quit pissin our money away on bullshit stuff...like kissing QAuebecs ass...paying for french on every cereal box.....time ta cut foreign aid...lets look after our own folks...maybees if all the MPs got fer a pension is what we get they might wanna work on a better plan .....

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