Mercifully, some common sense appears to have returned to the House of Commons, thus clearing the way for policy-makers finally to take action to shore up the retirement savings system.
There were two pieces of good news for aspiring retirees in February. First, the feds agreed to co-operate with Ontario’s government to facilitate the launch of the province’s proposed provincial pension plan, the Ontario Retirement Pension Plan (ORPP).
The previous federal government was cynical and petty in refusing to allow Ontario access to the federal administrative infrastructure for the ORPP once Ontario had decided to proceed with that pension program. The new federal government has reversed that decision, ensuring that if and when the ORPP does go ahead, it would be able to piggyback on existing federal infrastructure, which should help the ORPP’s efficiency and cost-effectiveness.
Even better, Ontario has decided to put its proposal on ice for a year, which will give the province more time to reach a deal with the federal government to enhance the Canada Pension Plan (CPP) and perhaps scrap the ORPP.
The launch of the ORPP was never anyone’s first choice for enhancing retirement security. Rather, that plan was a last-ditch response when efforts to bolster the CPP seemed futile – primarily due to federal intransigence. Now that the prospect of enhancing the CPP is back on the table, there’s the possibility that the ORPP will be deemed surplus to requirements.
A new report from the Ottawa-based Broadbent Institute reveals that almost half of Canadians who are on the verge of retirement (people aged 55 to 64) have no workplace pension; and, the vast majority of those workers do not have much in the way of retirement savings. For Canadians who earn between $50,000 and $100,000 per year and have no pension, the median value of their retirement assets is just $21,000. In the current low-return environment, the savings challenge is much more daunting than in the past. The most practical way to address this predicament is through CPP reform.
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