The House Mailbag: Pension Reform

Listeners of The House had lots to say about last week's segment about pension reform. Here are some of their comments:

-Jean Hjort:

Ted Menzies forgets that Canadians remember the fall of 2008 financial collapse of our economies. Whenever I hear about a pension plan administered by private insurance companies I think of three letters: AIG. Or perhaps the investment fraud schemes where seniors lose their life savings. If my 15 year-old daughter contributes to the government's new ill conceived pension supplement over the course of her life, will the "insurance" company still exist when she retires? Or will it have gone bankrupt with plan holders at the end of the list of creditors like the Nortel employees still suffering from their losses. The government is the only reliable safe manager I would trust. While it may make errors it also attempts to repair the damages we suffer. Will the multi million dollar salaried CEO of an insurance company have my daughter's retirement as his first concern? Or will he be more concerned about his present stock options and dividend payments? Canadians should beware of placing their hard earned dollars much less the safety of their futures in private hands. The horror stories are too fresh to forget.

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-Martha Cadotte from Longueuil, Quebec: I was listening to you and your guest this morning regarding the Canada Pension reform or actually non-reform and I have to give you the point of view of one in the low medium bracket of income varying over the last 25 years from 30,000$ to up to 40,000$/year. Because I did not hold a permanent position and when I did I lost it for a number of reasons including company bankruptcies, I was never able to earn enough to make ends meet let alone put money in a retirement fund. If the government puts in place a system where you can opt out I'm afraid I would have to opt out. Another example is where I work at the moment, I am deducted 200$/month from my income for an employee pension plan which is of no use to me since I am too close to retirement age for it to be of any help because when I retire the amount I will have painstakingly saved will give me the same amount that I would get from the pension plans including the supplement for low income. My point is that it's all good and fine for the policy makers to say that we have to take care of ourselves and save for our retirement but that works only if your income is 100,000$/year or more like theirs. For the majority of us ordinary, somewhat unlucky people like me, it is impossible to put money aside and it's getting worse since incomes are stagnant whereas cost of living climbs at 20 times the rate of any amount we may get as salary increase. Mr Harper is totally insensitive and has no clue what it is like to struggle all your life and get nowhere and he upsets me to no end when he says that we shouldn't depend on government to help us. I for one have not had the help I needed from my governments or employers when I got sick or lost my job. -Dick Peacocke from Ottawa: Governments have failed retirees on several counts: 1. During our working career they reduced the room in individual RRSPs leaving no choice but to depend on the defined benefit pension for retirement. And you weren't able to opt out. 2. Their financial supervision was negligent and governments allowed companies such as Nortel to build up huge deficits in their pension funds. 3. In liquidation and bankruptcies they are favouring banks and speculative junk bond holders over retirees in the distribution of assets. This is very much like saying "You must use this boat which I have just scuttled! It is your own fault when your feet get wet!" -Rosemary Spendlove: Don't we also need to consider the difficulties that many university and college graduates are having to find work that helps to establish them in meaningful and secure employment? Those of us, now at retirement age, belong to a generation that benefited from readily available scholarships and grants to help with university fees plus lots of recruiters offering us careers. By extending the retirement age, are we making space for those younger workers who will be helping to provide for us in our retirement years? Can someone from the Canadian Federation of Students be brought into this discussion? At one point in my work this concern led to a decision to share my job with a younger worker. -Glen Hammerlindl: My question about pensions is why doesn't the government enact stronger legislation to protect pension income and benefits from private plans? Many Nortel employees were unable to make a significant contribution to a RRSP during their careers. This was because of the CRA's pension adjustment (PA) provision. The PA is the amount that represents the value of the benefits the employee earned each year under the employer's registered pension plans (RPP) and deferred profit sharing plans (DPSP). Employees "earned" it. It impacted the employees' ability to make contributions to an RRSP and in the end, they get practically NOTHING. -Brian Tuthill: There was no discussion of the current poor participation rate for RRSP's which are similar but far better in the long run than what is being proposed, because of the immediate tax savings. If they were really serious about retirees being better off they would revise RRSP's to be more mandatory so as to increase the participation rate. This would reduce their revenues, so instead they want to introduce something that looks like they care but at no cost to them. What is being proposed isn't a bad thing in principle, but there is already a better system in place that could be adjusted to get better results. -Ken Raynor from Delta, British Columbia: I don't think it really matters if a pension fund is run by the government or private interests. In our current era of globalization, the investors (including our pension plans) are being robbed by the executives of the companies we invest in. The company I work for barely survived the downturn, yet the managing board voted to double their bonus to nearly 17 million Euros - over 2 million for each board member. Meanwhile for the investors, the dividend was cut, and for the US employees, the company cut their medical insurance and dropped it entirely for retirees. Everywhere the employees had vacation cut and thousands were let go. In a similar vein, what is the outrageous amount the investors in Magna are going to pay to reclaim their voting rights from Frank Stronach? With Golden parachutes and stock options that can be exercised retroactively, the board members are free to manage the company to line their own pockets and not in the interests of the shareholder. Since the directors are the CEO's of other companies, it is in the interests of the board members to approve any outrageous pay scheme, in the expectation that they will get theirs approved in turn. -Orion Ussner Kidder: The one point that nobody made during your piece is the implication that, although administered by private interests, these hypothetical retirement investments would be guaranteed by the government. On the surface that seems like a good thing because it means that the funds wouldn't fail, but in reality what's happening in that scenario is that the government would be using tax-payer money to prop up a private interest. No private company will take on this function without various promises from the government that it will be effectively impossible to lose money on it, much like RBC took on the role of student loans. That government guarantee would put into practise the old neo-con philosophy that powerful, ever-expanding governments should use public money to supply private companies with "profit." The goal here is quite plainly not to provide people with better retirement funds. Rather, the scam is to use retirement funding as an excuse to redirect money from the public sector to the private.
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