The positive gains achieved by the federal and provincial finance ministers on the enhancements to the Canada Pension Plan (CPP) are not bad, they’re not everything labour wanted, but it’s a step in the right direction.
It means at the end of the day a one percent increase in payments for workers and employers. Your CPP earnings replacement rate in retirement will increase by about one third, from the current 25% of income to 33.3% of pensionable earnings. So, by 2023, for an extra $47 a month in CPP premiums you will gain about $358.00 in CPP pension benefits each month or just over $4,300 a year in your retirement based on having an annual salary of $54,900. Not a bad improvement for all workers coming up through the system of employment. Let’s remember that CPP is a savings plan, and is a great way for workers to save for retirement.
The fact is that an increase in CPP benefits will lead to long-term economic growth because people with better pensions are able to spend more in their communities in retirement. The last CPP contribution increase that were phased-in, employment rose and the economy steadily grew. The CPP is the most effective way for workers to save for retirement. It follows you from job to job, no matter where in the country you work. Even if you’re self-employed or have to take an absence from work in cases such as parental leave, the CPP is there for you.
The CPP is far more secure than private investments than RRSPs, because it is guaranteed to pay out for life and offers far lower contributor and administrative costs than individual savings or private pension plans. So many people in the downturn of the economy had huge losses with private savings plans. The cry from the right-wingers is unfounded, it’s not a huge cost and fact is, corporate taxes have been reduced over the last 30 years, from a high of 36% down to 15% today. Workers haven’t seen a reduction like this. It amounts in the end after a phase-in over seven years and workers will pay the price of a cup of coffee and a doughnut to have a better retirement.
It’s important to remember that unions through their national body the Canadian Labour Congress, national unions and the Federations of Labour across the country started this work seven years ago in a campaign to strengthen the CPP on behalf of all Canadian workers. CPP expansion will mean a lot for the more than 11 million workers who have no workplace pension plan. On the other side those right-wing groups also lobbied against change, that’s why it took so long. Part of the reason for the unions push for pension reforms through the CPP was simply because many of the social programs we once had, have seen some significant erosion over the years. Cuts to social programs that were agreed to by the right wing as they won those tax breaks for the corporations who fund their work.
Unions roles are to protect our own members and to ensure we have better laws that protect all workers, that build strong communities where we all live and work. Let’s be clear – not every union member is part of a strong pension plan,
Danny Cavanagh is president of the Nova Scotia Federation of Labour.