Clash of the Titans

The CLC is pissed and wants to find out who the party pooper is. Who killed CPP reform? CLC asks

The Canadian Labour Congress (CLC) is looking for the culprits that stymied the enhancements to the Canada Pension Plan (CPP).

The CLC publicly announced that in late December 2010 the group filed two Access to Information requests to seek internal government and external lobbying materials related to the CPP and private sector pooled registered pension plans.

“Last summer, Jim Flaherty said that improving the CPP was the best way to ensure the retirement security of Canadians,” says CLC president Ken Georgetti. “But the minister has changed his mind and now favours vastly inferior private sector plans. We want to know who got to the government, and we hope this Access to Information request will provide that information.”...

“They were going to go ahead with a two-pronged approach to retirement security, and a significant part of that was an enhancement to the Canada Pension Plan,” he says in the clip. “It seems to me that the power of the financial services industry just showed how quickly they can change the mind of a government that was persuaded by facts, to turn them around and reward these banks that actually put us into the depression we have found ourselves with regard to our economy.”

Clash of the Titans

The lead-up to Kananskis was an eventful time. This lead-up was covered in my blog On the Trail to Kananaskis. 

This is an important time for pension reform in Canada. 

Next month in Kananskis the finance ministers of Canada are getting together to develop a plan for improving Canada's retirement security system. One the table are two proposals, one to improve CPP and the other to add  an additional, or supplementary plan on top of the CPP. 

Organized Labour Plan

The public sector unions are in  support of boosting the CPP pension. They are correct that something needs to be done and this plan will be a bonanza for them. 

Public sector unions already have the advantage of being able to get full pensions, when qualified, as early as age 55.

The CLC has put together a good analysis of their position and the problems for Canadians on the CLC website. Retirement Security for Everyone . They have also provided a good overview of the statistics in each province.  What Do They Mean for each Province?

The key point for this initiative is that  the CPP changes public sector unions recommend will have a windfall effect on public sector pensions.  Public sector plans are currently integrated with CPP, their plan to double CPP will greatly reduce the pension shortfalls that many public sector face today.

As we know know the result was indeed the supplementary pension top-up or as we call it now the Pooled Retirement Pensions Plan.

Beware of unions bearing pension solutions. 

 

The CLC is being deceptive in not disclosing a major benefit for them in an enhanced CPP. It will eliminate the shortfalls from the gold-plated public sector pensions. Catherine Swift covered this issue and her editorial to the National Post.Is the Piggybank Broken? — Demand fairness

I must confess when I first saw the zeal with which this proposal was being promoted by government worker unions, I was perplexed. Weren’t these the people with the generous pension plans? The plans that have very early retirement provisions, indexed to inflation so their real value never declines, and that include extended health benefits that the rest of us can only dream about? Why would these entitled folks even care about CPP, which was only designed to provide a fairly basic level of retirement support — $11,000 annually at best?

And then it struck me. All public-sector pension funds in Canada are in a major deficit position. Simply put, they don’t have enough money to fund the promises they have made to existing and future retirees. And yes, fellow private-sector taxpayer, you and I are on the hook for these deficits.

At the federal government level alone, current deficits are about $200-billion — big bucks. Provinces and municipalities are experiencing a similar pension tsunami. If the public-sector unions succeed in convincing governments to substantially increase CPP premiums, then the deficits that currently exist in public-sector pension funds will be sharply reduced. And that will in turn lessen the pressure to make major structural changes in public-sector pensions to bring them in line with their private-sector equivalents, perpetuating the pension apartheid that currently exists.

This was not the only reason in the decision to go to the PRPP. An important factor is that the financial services industry in Canada is a big part of our GDP. Moving the management of Canadians reitrement savings would have a major impact on one of Canada's major GDP producing industries. Statscan - Gross domestic product at basic prices

The study of GDP is an interesting analysis. To highlight the major sectors in 2009 

(in Millions)                                                                            2005                           2009  

All industries                                                                    1,158,680              $ 1,194,541   

Mining and oil and gas extraction                                      55,941                         51,476 

Manufacturing                                                                      187,901                         151,120 

Finance and insurance, real estate etc.                         222,677                    250,938 

Public administration (Direct Government)                    65,115                           73,216 

Educational services                                                              55,292                          61,302   

Health care and social assistance                                      72,735                           81,090

Total Government (above 3)                                           193,142                       215,608

Sorry there is some sort of a glitch in Blogger that prevents these numbers from lining up?
 
It appears that there is a clash of the Titans. A battle between the two fastest growing sectors in our economy, financial services and government. It will continue to be interesting to watch this battle progress.

Bill Tufts 

Fair Pensions For All