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Pension Reform Missing Mark

Voluntary pooled pensions and reforming the Canada Pension Plan to close gaps in Canada’s retirement savings will “miss the mark” because governments are thinking too small, says a study by the Institute for Research on Public Policy. Michael Wolfson, author of the study and a former assistant chief statistician at Statistics Canada, says a large number of Canadians now over age 40 can expect “a significant decline in their standard of living upon retirement.” Solutions that take a half century, such as, for example, enhancing the CPP, will not help them much, he says. Instead, a series of changes to speed up the process while reducing the cost for younger workers could provide some help. He suggests that the eligibility age for CPP be raised to between 68 and 70. As well, increases to maximum pensionable earnings and the income replacement rate should be phased in over 20 years, rather than the nearly 50 years projected if the plan improvements are fully funded. These reforms would have benefits beyond the CPP such as encouraging workers to remain in the labour force longer. This would contribute to higher tax revenues, increased levels of consumption, and lower government spending on income support programs such as Old Age Security and the Guaranteed Income Supplement.

Courtesy of Benefits and Pensions Monitor website News Alerts

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