Pensions legislation being introduced by the Harper government today (Thursday) will reward Tory friends in the financial services industry, but do nothing to help Canadians facing a looming retirement crisis, says Alberta's largest labour group.
"This is Harper once again putting corporate profits ahead of Canadian people. The Pooled Retirement Pension Plan (PRPP) is another giveaway to the financial services industry – it's just one more product they can sell to working Canadians while continuing to charge outrageous service fees," says Gil McGowan, president of the Alberta Federation of Labour, which represents 145,000 workers.
"The Harper pension plan will do nothing to help Canadians facing a retirement-income crisis. Using PRPPs is like trying to put out a forest fire with a squirt gun. They are nothing more than glorified Registered Retirement Savings Plans (RRSPs) – and the recent global recession taught us how flawed and flimsy they are," he says.
McGowan says PRPPs fall far short of what working Canadians need on multiple grounds.
- They are not mandatory: Like RRSPs, only those with higher incomes will be able to buy them. Only 38 per cent of Albertans contributed to an RRSP in 2008, and the median contribution was only $3,200 per year. More than 60 per cent of all RRSP contributions come from people with annual incomes of more than $80,000. Only mandatory plans are effective at helping lower-income earners save for their retirement.
- Employers do not contribute: Without matching employer contributions, the PRPP is a glorified savings plan – one that those on lower incomes cannot afford.
- They are not defined benefit plans: Defined benefit plans like the Canada Pension Plan (CPP) provide security by guaranteeing retirement income based on how much has been contributed over a working lifetime. Defined contribution plans, such as PRPPs, means the entire risk of market fluctuations is borne by the individual. Retire during a market slump and you could spend the rest of your life in poverty.
- PRPPS are run by banks and financial institutions: The financial services industry has a history of charging outrageously high fees in Canada, about five times higher than CPP.
"Eight out of 10 provinces backed a plan for a modest expansion of CPP as the best way to tackle the retirement-income crisis. They were supported by economists, pension experts and 78 per cent of Canadians, according to an Environics poll. It's time for Harper to start listening to Canadians, but it seems he only has ears for his corporate friends," says McGowan.
"When the federal government abandoned CPP expansion in December 2010, Harper's excuse was that the fragile economy meant was 'now is not the time.' If timing is the only issue, we call on Harper to commit to CPP expansion when the economy is stronger, when he has eliminated the deficit. There will be no excuse to betray Canadians again."
Gil McGowan, AFL president, 780-218-9888 (cell)