Launch of AFL Real Pension Reform Campaign
November 16, 2010
Matrix Hotel, Edmonton, Alberta
Good morning and welcome.
We've invited you here today because a crisis is looming: a crisis in retirement income.
It's a crisis which, in many ways, has already begun ... but which will only worsen as more and more Canadians reach retirement age without adequate savings.
It's a crisis which will rob millions of Canadians of security and dignity in their retirement years.
It's a crisis that will hurt the economy as the spending power of the seniors shrinks.
And it's a crisis from which Albertans will not be spared.
The good news - and there is good news - is that nine provinces and the federal government recognize that a serious problem exists and are prepared to do something about it.
The bad news is that our province, the province of Alberta, is acting as a spoiler and standing in the way of a real national solution.
Other provinces and the federal government agree that Canadians aren't saving enough for retirement.
They agree that fewer and fewer people are covered by workplace pensions.
They agree that the private investment industry has failed miserably to deliver on all the promises they've made over the years about private retirement savings and the dream of Freedom 55.
Other provinces and the federal government also agree on what action needs to be taken.
They agree that a big part of the solution lies in expansion of that one part of pension picture that remains solid: the Canada Pension Plan.
Unlike many private sector workplace pensions, CPP is fully funded and actuarially sound for at least the next 75 years.
It's also portable from job to job and from province to province.
And unlike mutual funds, CPP charges rock-bottom management fees and provides a guaranteed benefit, as opposed to the uncertainty of most mutual funds which are tied to fluctuations in the stock market.
The only real problem with the CPP is that it's too small. With an average annual payout of only $6,000 and a maximum annual payout of only $11,000, CPP is one of the least generous national pension plans in the developed world.
Pension experts say that people need income equivalent to about 70 percent of their pre-retirement income to maintain their standard of living in retirement. But CPP only replaces about 25 percent for people earning $47,000.
That's where we in the labour movement think pension reform needs to start.
We're calling for a gradual doubling of CPP benefits, so that CPP can replace 50 percent of pre-retirement income for people earning $47,000 a year.
It's a modest, incremental solution which has been endorsed by seniors groups, by student groups, by prominent economists and academics and, as I've said, by the Finance Ministers and Premiers from every province except our own.
Even the federal Conservatives support CPP expansion.
Federal Finance Minster Jim Flaherty is behind the idea. Prime Minister Stephen Harper has given it his stamp of approval.
Even Diane Ablonczy, one of the last remaining original Reform Party MPs and currently Secretary of State for Seniors, is giving CPP expansion her support.
Just two weeks ago, I had a long talk with Minister Ablonczy in her office on Parliament Hill.
She admitted that, for ideological reasons, she hesitated to support CPP expansion.
But as the federal minister responsible for seniors, she said she's met too many seniors who simply can't make ends meet.
She's seen too many seniors who worked hard all their lives, raised families and contributed to their communities ... but who didn't have workplace pensions and just couldn't find any money at the end of the month to save for their retirement.
That's why she says we need across-the-board, mandatory solutions like an expanded CPP.
Unions. Seniors. Students. Economists. Provincial leaders. Federal leaders.
It's all part of what the Globe and Mail calls an "emerging national consensus" to address the looming crisis in retirement income by expanding CPP.
It's a consensus that could lead to a ground-breaking agreement when finance minister gather in Kananaskis a month from now. Alberta could be the site of an historic policy breakthrough ... or the meeting in Kananaskis could be remembered only as a missed opportunity.
At the moment, we remain optimistic ... but we're also more than a little frustrated.
The only dissenting voices to be heard on the issue of CPP expansion are coming from banks and insurance companies - who want to keep charging Canadians outrageous fees for the under-performing retirement planning services provide - and from the Alberta government, which has staked out an ideological position that is at odds with the facts and which does not reflect the opinion of Albertans or uphold their best interests.
Speaking on behalf of his government, Alberta Finance Minister Ted Morton has said that Albertans don't need an expanded CPP. He has said they don't want an expanded CPP. He has also said that real solutions lie elsewhere.
In particular, in speeches, in guest columns, and most recently in a new document entitled "Alberta Aging Population Policy Framework" (which was released just last week) Morton outlines a vision for seniors policy that most Albertans have not heard about ... but which almost nobody would support if they had.
For example, Morton says the onus should be on individual Albertans to save for their own retirements - even though the evidence clearly shows that most Albertans don't have enough money left over at the end of the month to set aside for an adequate retirement.
Morton says that if they don't have adequate income, seniors should be encouraged to sell of their assets, most notably their homes.
Morton also says the looming crisis in retirement income should be seen as an opportunity for businesses worried about labour shortages because it will force more and more people to keep working until their 70 or 75 years old.In fact, one of the only major policy promises in the government's new Aging Population Policy Framework is to provide new career counselling services to seniors ... presumably so they can spent their golden years working as Wal-Mart greeters instead of enjoying a dignified retirement.
But that's not all. If any additional pension programs are needed, Morton says they should be voluntary - meaning employers should be able to opt out if they chose - and they should be managed by the private investment industry as opposed to the lower-cost, more efficient and more accountable people who run the CPP.
That's the Alberta government's vision for retirement policy. Sell your house. Work until your 75. And keep paying exorbitant fees to banks and insurance companies for under-performing mutual funds.
That's why we're launching our campaign today. And that's why our slogan is "Hey Ted, Albertans want REAL pension reform."
Behind me, you see our new campaign website at www.realpensionreform.org.
On the site you'll find all sorts of information, documents and links dealing with issues of retirement insecurity and pension reform.
We're also releasing the results of a province-wide poll that we conducted last month.
Like previous polls conducted by other labour organizations and media outlets, our poll shows that an overwhelming majority of Alberta support expansion of CPP as a solution to the looming crisis in retirement income.
78 percent of those surveyed don't buy the argument advanced by Ted Morton that Albertans have already made adequate arrangements for their retirement.
67 percent don't buy the argument that banks and insurance companies should be chosen over the CPP to run an expanded pension system.
And 71 percent say Ted Morton and the Alberta government should "get out of the way and allow changes to CPP that will put more money in the pockets of all Canadians when they retire."
We're also releasing a report outlining the real situation in Alberta when it comes to retirement income.
The report was prepared for us by economist and pension expert Hugh MacKenzie - and is appropriately titled "It IS Broke - So Fix It!"
So how bad is the situation in Alberta? How great is the need for reform?
Well, our report shows that Alberta has the lowest proportion of workers covered by workplace pensions in the country - and that number is falling.
Our report shows that only 38 percent of Albertans contributed to an RRSP in 2008 - and the median contribution was only $3,200 a year.
Our report shows that 60 percent of Alberta's RRSP contributions are made by people earning more than $80,000 a year, meaning that middle and low-income Albertans are being left out and left behind.
Our report shows that in 2007 half of Alberta seniors had no investment income at all and that a third of them survive on less than $16,000 a year.
And our report shows that management fees charged by mutual fund companies are eating up between 40 and 60 percent of the investment gains earned by individual Albertans on their retirement savings.
That's the real face of Alberta's retirement income system. It's a system that's broken. It's a system that's exposing a growing number of Albertans to insecurity. And it's a system that will only get worse if major fixes are not implemented soon.
So the goal of our campaign is to send a message to two groups: the first being finance ministers from other provinces and the second being Members of the Legislative Assembly here in Alberta.
For finance ministers, our message is simple: Ted Morton doesn't speak for all Albertans.
If he changes his mind and supports the consensus in favour of CPP expansion great. But if he doesn't, if he sticks to his guns about doing nothing in the face of the growing pension crisis...well, then we want to make it clear that he's out of step with the majority of Albertans.
Our message for Alberta MLAs, and especially for members of the government caucus, is also clear.
We want to send them the message that CPP expansion is needed and that it makes sense.
We want them to understand that an expanded CPP would be good for individual Albertans because it will give them a low-cost way to generate an increased stream of guaranteed income in retirement.
We want them to understand that an expanded CPP would be good for employers, especially small employers, because it will allow them to provide increased retirement benefits for their employees without exposing them to the risks and liabilities associated with running their own pension plans.
We want them to understand that an expanded CPP will be good for taxpayers because it will mean that fewer people will have to rely on tax funded supplements like GIS.
Finally, we want them to understand that an expanded CPP would be good for our broader economy and society because it would give seniors more money to spend in their communities and it would allow them to live with security and dignity.
In the end, despite the spin coming from people like Finance Minister Morton, tens of thousands of Albertans are facing a bleak retirement future.
But it doesn't have to be that way. We know what needs to be done. The rest of Canada is in the process of mustering the political will to solve the retirement income crisis before it takes hold.
What's required now is for Albertans to speak out and to demand that their provincial government either get on board with the move to expand CPP or get out of the way.
Thank you all for being here this morning.
Let's hope that when Canada's finance ministers gather in Kananaskis this December Alberta will join them in delivering the Christmas present that Canadians really need - the gift of retirement income security.
Gil McGowan, President