Enjoy cable television, or dining out? What about the odd trip abroad? The comforts that millions of Canadians experience regularly – even take for granted – will be stripped in what looks to be a relatively Spartan post-work life, unless action is taken to squirrel away more cash for retirement.
In response to Finance Minister Joe Oliver’s proposed expansion of the Canada Pension Plan announced last week, CIBC Economics suggested many of us face a “substantial” drop in living standards unless we find the means to offset the hit to incomes at retirement.
How big of a drop? CIBC economist Benjamin Tal said many face at least a 20 per cent decline living standards, with discretionary spending budgets getting sideswiped. For younger cohorts, the drop is even bigger.
Steep decline
While older workers nearing retirement appear to be in fine financial shape for the most part, the rest of us aren’t: “Millions of others are headed for a steep decline in living standards in the decades ahead, particularly those who are currently younger and who are middle-income brackets.”
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According to Statistics Canada, about 18 million Canadians are presently working. Of those, 5.8 million – or 32.4 per cent – are faced with a financial straitjacket in retirement, Tal suggested.
A scaling back in private sector pension plans coupled with persistently low savings rates in recent years means younger workers aren’t on the same path to financial security later in life compared to their parents.
Some provinces, like Ontario, are moving to implement new mandatory pension schemes or are mulling the idea.
Change essential
Critics of Oliver’s new plan to expand the CPP – announced just months ahead of a fall general election – have panned the proposal as little more than a vote winner.
“If they were serious about this, we would have seen something a lot sooner than on the eve of an election,” said Nathan Cullen, finance critic for the NDP. “It would have been in this budget.”
CIBC’s Tal said that regardless of its timing there’s a genuine need to move on savings-boosting policies.
“Without getting into the politics of it, it is important to remember why a change to the system is essential,” he said.
WATCH: Finance Minister Joe Oliver discusses expanding CPP in the House of Commons.
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