The CPP was not designed to meet some arbitrary target set by planners, writes Sean Speer in the Toronto Sun. Rather, it provides a retirement income baseline so that most Canadians don’t live in poverty in their elderly years.
By Sean Speer, June 24, 2016
William F. Buckley Jr. once said that he’d rather be governed by the first 2,000 names in the Boston telephone book than the Harvard faculty. Buckley’s point was that the collective common sense of the general public offered greater wisdom and foresight than the intellectual and political elite of his era. He was on to something then. It’s even more relevant now.
Just think of the retirement income debate that’s unfolded here in Canada in recent days. Federal and provincial finance ministers met behind closed doors to decide how much more Canadians should be forced to save because a group of academics, big business groups, and union organizers think we’re saving inadequately.
That the details of the CPP expansion have been so slow to trickle out is symbolic of this entire exercise. It speaks to the technocratic impulse that’s underpinned the retirement income debate since it began in earnest in 2009. Trust us, we’re told, experts know best.
The premise of last week’s CPP hikes is that Canadians are failing to save enough to maintain a “reasonable” level of consumption in their retirement years. That people may have different expectations or preferences – some may wish to travel and thus require more savings, on one hand, and others may intend to work longer or curtail consumption and need less savings, on the other hand – is minimized or dismissed.
Instead planners confidently assume that so-called “undersavers” can’t exercise self-control or don’t know any better and therefore the state must do it for them. They even seem to know precisely how much we ought to be saving. It’s all very convenient.
Voluntary savings programs such as Tax-Free Savings Accounts are curtailed but the government will now force more savings – 8% (split evenly between employers and employees) – for earning up to $82,700 in 2025. Evidence that more government-administered savings will lead to less voluntary savings and thus a reshuffling of how we save rather than how much we save seems to fall on deaf ears. More public savings seems to be the motivation.
This is the illuminating part. Pro-CPP proponents argue that Canadians presently pay a smaller share in compulsory social security taxes than most other jurisdictions. The implicit point seems to be that this is a bad thing and last week’s CPP deal fortunately reverses this regrettable trend.
But this misses the basic point of the public pension system. The purpose of public pensions is to provide a basic retirement income baseline so that most Canadians don’t live in poverty in their elderly years. It’s not to meet some arbitrary target set by planners or to ensure that Canadian seniors can go on trips or purchase a second car. These aren’t matters for public policy. Those are the choices of responsible adults.
Canada’s retirement income system is serving Canadians well according to this test. Seniors’ poverty rates are among the lowest in the industrialized world and the lowest among age groups in Canada. Most seniors have enough savings to maintain a basic level of consumption in their retirement.
Could it be more? Sure. But that’s a private concern rather than a public good. If only the planners and expert agreed. Where’s a phone book when you need one?
– Sean Speer is a senior fellow at the Macdonald-Laurier Institute