Working to improve Canada’s pension plan

“I lost about 95 per cent of my income when I retired.”

Wiesia Legal, 65, is one between many Canadians that has has their income dramatically reduced post-retirement.

Because of her and many other citizens throughout the country, Prince Edward Island Finance Minister Wes Sherida, and the Liberal provincial government in Ontario are asking for expansion of the Canadian Pension Plan (CPP).

“Right now, CPP only covers earnings below roughly $50,000, and it aims to replace only about 25 per cent of that income in retirement. That’s not enough for middle-income Canadians. The PEI plan would bump up coverage to incomes up to roughly $100,000, and would aim for 40-per-cent income replacement. It could be accomplished by raising CPP contribution rates from 9.9 per cent (split between employees and employers) to around 13 per cent,” the Globe and Mail wrote in an editorial.

The pension system in Canada is constructed from three different parts: the Canadian Pension Plan (the one provinces want expanded), Old Age Security and the Guaranteed Income Supplement (which “provides a monthly non-taxable benefit to Old Age Security (OAS) recipients who have a low income and are living in Canada,”) and company and-or individual private savings through Registered Retirement Saving Plans (RRSP).

Many people agree that CPP is one of the greatest pension plan. It is cheaper than private pension plans and offers a lot of flexibility, which allows Canadians to retire sooner or later and get retirement income according to their contributions.

But there is something to be improved. According to the Globe and Mail, “the provinces and the feds agree that Canadians aren’t saving enough for retirement. A large number of Canadians – particularly middle-income earners in the work force today – are at risk of seeing their living standards fall in the golden years.”

Wiesia Legal, who retired at the age of 60 and started getting her CPP early, at a reduced rate, says, “The CPP pays very little and I don’t know how people can survive on it without any other income.”

She added that during her working years she also contributed to an RRSP matched with contributions from her employer. “Once I retired I could withdraw from my RRSP’s and being in a low income, bracket my taxes would be minimal.”

The last Statistics Canada report from 2011 shows that only 26 per cent of eligible Canadian taxfilers made contributions to registered retirement savings plan, the same as in 2009. It also shows that encouraging Canadians to contribute to private pension plans has not worked so well.

Because of that, working on the CPP seems to be the last option to improve the retirement income system in Canada, and consequently to provide a better life, especially for middle-classes Canadians.


Journalism student, musician, sports lover, Brazilian, living in Vancouver!

1 Comment

  • Avatar
    Reply December 8, 2013

    Cindy St-Laurent

    The CPP is definitely something that will effect our generation if it isn’t fixed, especially do the baby boomers that are currently going to rack up all the money from the government. I am not saying that they do not deserve the money but I also feel that their should be a way to make sure that the CPP can provide for them without most likely providing even less for us by the time we retire.

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