(January 25 – 11:20 ET) – Canada’s retirement income system is at a critical juncture, warns a report released today by the Association of Canadian Pension Management (ACPM). Without major changes over the next few years, the combined forces of the retirement of the baby boom generation, rising life expectancies and falling birth rates will seriously strain our retirement and health care systems by 2030, says the ACPM.
That is when all Boomers will be at least 65-years-old, and there are expected to be just two active workers for each retiree. That ratio is now 4-to-1. The ACPM report, Dependence or Self-Reliance: Which Way for Canada’s Retirement Income System? was prepared by a volunteer task force of concerned retirement finance experts.
The report calls for concerted action by federal and provincial governments, the financial services industry, employers and unions. “Most importantly, individual Canadians must become aware of the issues and the likely impact on their own planning,” stresses ACPM president Jeffrey Graham.
The report calls for national debate on measures to ensure that future retirees can live comfortably while future workers are not unfairly burdened since, without well thought-out change, by 2030 Canada will have a large number of dependent seniors whose support will require large tax bills for future generations.
The report suggests recent Canada/Quebec Pension Plan reforms only begin to address the mounting demographic pressures, and it notes that inefficient regulation and management prevent private pension plans and individual RRSPs from financing as much of the future burden as they could. The report presents 26 wide-ranging recommendations. They include:
> The Chretien government should drop its “50-50” policy of devoting half the current budget surplus to program spending and focus instead on reducing the national debt.
>Immediately increase pension and RRSP contribution limits by 20 percent
> Eliminate the foreign content limit for RRSPs and pension plans.
> Better target Old Age Security and Guaranteed Income Supplement benefits for seniors. Coordinate the public pension and tax systems so that lower-income workers are no longer unfairly taxed to fund pensions for better-off seniors.
> Reduce current disincentives for middle income Canadians to save for their own retirement. The combined effect of taxes and OAS/GIS clawbacks should in no case produce an effective marginal tax rate of more than 50 percent.
> Create a single, sensible Uniform Pension Act that all provinces could adopt to end the costly patchwork of provincial and federal legislation that now governs registered pension plans.
> Encourage Canadians to work longer.
The Association of Canadian Pension Management is the national voice of Canada’s corporate and public sector pension plan sponsors and the professional firms that advise them. ACPM’s 1,000 members represent over 500 pension plans that total $400 billion, representing 80 percent of all Canadian pension assets.
-IE Staff