Almost 90 per cent of working Canadians believe the Canada Pension Plan will be an important source of retirement income for them, but a vast majority also report they do not want a mandatory increase in CPP premiums, according to a new poll released Wednesday in advance of a federal-provincial meeting on pension policy reform.
The Canadian Federation of Independent Business, which has been an opponent of proposals to expand the CPP to provide more coverage to middle-income earners, said an online poll of 1,607 current workers found 58 per cent felt the CPP and the parallel Quebec Pension Plan will be “very important” for them as a source of retirement income while a further 31 per cent said it will be “somewhat important.” Yet a vast majority also said they preferred government policy solutions to boost retirement incomes that would involve lower taxes, new government incentives or voluntary options over an expansion of CPP coverage and corresponding higher premiums.
The results are in contrast to survey findings reported Sunday by the Canadian Association of Retired Persons, which found 71 per cent of 2,654 members surveyed strongly support an expansion of CPP benefits and felt the government should not stay in office if it does not expand the CPP.
The CFIB poll, however, found only 18 per cent said they felt the best solution was “a mandatory increase in CPP/QPP premiums,” while 54 per cent said their top choice was to “control government spending and reduce taxes to allow Canadians to contribute more towards retirement savings” and 47 per cent favoured new government incentives to save such as a “one-time match for an RRSP/TSFA contribution.”
Another popular option for 35 per cent of respondents was to allow people to voluntarily contribute more toward retirement through new retirement savings options, identified in the poll as a “voluntary CPP/QPP.” The poll did not ask about a proposal to create a voluntary new Pooled Registered Pension Plan, which is the option being favoured by the Harper government as a way to provide a new personal savings vehicle for workers who don’t have a company pension plan.
The online poll was conducted for CFIB by Angus Reid Global between Nov. 28 and Nov. 30.
The small business advocacy group said the poll results send a clear signal of public preference to federal and provincial finance ministers who will be meeting on Sunday and Monday in Meech Lake, Que., to discuss retirement policy reforms.
“Finance ministers should be asking if mandatory CPP/QPP hikes are a good idea, not just when is the right time to introduce them,” CFIB president Dan Kelly said in a release. “Although governments have been talking about this for years, no one has ever stopped to ask Canadians if they support the idea.”
CFIB executive vice-president Laura Jones said the association’s poll showed 65 per cent of people are not saving more for retirement “because they simply can’t afford to” and 45 per cent say higher CPP premiums would reduce their ability to spend on essentials such as food, rent or mortgage payments.
The association said opposition to raising CPP premiums was even higher in a separate survey of CFIB members who are small business owners, with only 7 per cent supporting a “mandatory increase in CPP/QPP premiums” and 75 per cent preferring reduced taxes to allow them to contribute more to savings.
Also Wednesday, the C.D. Howe Institute think tank issued a new report on workplace pension plans, saying low investment returns are likely for the next decade and pension funds need to adjust their overly optimistic predictions for their long-term returns.
Report authors Richard Guay and Laurence Allaire predict long-term annual returns in the neighbourhood of 2.5 per cent on long-term bonds and 6.9 per cent on stocks, giving a typical balanced portfolio a real return of just 2.7 per cent after inflation over the next decade. By contrast, pension funds are forecasting average real returns of 4.3 per cent after inflation in the next decade.
“Defined benefit pension plans should acknowledge these realities,” Mr. Allaire said in a release. “Adjustment might be required, which will be difficult, to reduce costs and deficits to acceptable levels.”
The report said individual savers will also be hurt by the same low-return trends, saying people with an average income of $50,000 a year who want to have retirement income at 70 per cent of that level – a popular savings goal – will need to save 14 per cent of gross income over 30 years, up from less than 10 per cent currently, to reach the same goals given the lower return assumptions.
More realistically, the authors said, people will have to work two years longer to save enough to reach the same income target.