Thank you very much for having us here.
We had some documents that were not translated in time, which I understand will be provided to you at a subsequent meeting.
CARP is Canada's largest national organization for older Canadians. We are a national, non-partisan, non-profit organization committed to advocating for a better quality of life for all of us as we age. We have 300,000 members across the country and 34 chapters.
We're focusing today on the need for pension reform. The current economic crisis has exposed flaws in the current pension regulatory regime. It has focused attention on the need for Canadians to better save for their own retirement and has highlighted their sudden realization that there isn't a vehicle allowing them to do so adequately.
We believe that the existing regulatory regime needs some amendment to rebalance the interests of employers and employees, including a governance role for members and retirees, to prevent the underfunding and insecurity of existing pension funds and of course to facilitate the outside chance that it we change these rules, we will encourage more employers to establish workplace pension plans.
In the absence of this kind of effort, we are recommending that there be a supplementary retirement savings vehicle. Many options have been proposed. The one that CARP proposes is a universal pension plan that is mandatory and affordable and capable of providing adequate income replacement while being sustainable, able to withstand the kind of demographic and economic shocks that we have witnessed, and independent of both government and the various employers.
Obviously, there are options that are available through the private sector and elsewhere, which you will hear about elsewhere.
I wanted to bring to you today the message from our membership. As you may or may not know, we have a newsletter that goes to 85,000 opt-in subscribers, all of whom are members, and we include in that newsletter a survey of advocacy priorities on which we can regularly expect 2,000 to 6,000 responses, often overnight.
By way of example, on Friday we issued another survey. We were referencing the Ontario budget mostly, but we did add a question knowing that we would be here today. We asked our members what they thought was necessary to solve Canada's pension problems. We gave them various options, including increasing CPP contributions, the creation of a voluntary or mandatory supplementary plan, and increasing RSP contributions or TFSA room, etc. I can just tell you right now that only 4% of our membership thought that nothing needed to be done. They made various selections and indicated various priorities, the greatest being that we should increase the CPP. Nonetheless, the point is that they believe there needs to be reform.
Who are they? These people are mostly already retired, mostly over 55, with the vast majority over the age of 65. In our sample, they indicated they were not badly taken care of in their retirement. Nonetheless, they want us to have the benefit of their own advice and experience to make things better for the next working generation.
By and large, they are fully supportive of the need for a supplementary pension plan. They reject the position of bankers' and investors' associations that Canada does not need another one-size-fits-all plan—as if that's what we are recommending—but they certainly reject the idea of doing nothing. They certainly put a priority on helping people who have pensions but whose companies have gone bankrupt and are now unable to look after them. So they have supported the idea of enforced improved protection in the event of bankruptcy.
The government's actions to date have been very disappointing. There have been two years of what I might call serial stalling. Yes, there have been consultations, and we're entering yet another round of consultations, but as to specific proposals for change, there have been very few. So we have very little to report to our members on what has happened in the last two years to address the economic downturn we have faced.
What is worse than doing nothing? It's telling us that nothing needs to be done. That's the situation we are in right now, and I want to spend the last couple of minutes of my time to address the issue of whether or not we can allow the status quo to stay.
Many people have been quoted as saying that reform is unnecessary because Canadians are saving enough, yet there are people who are much more experienced than me on these issues who have talked about the need for reform. They include the C.D. Howe Institute, the TD Economics group, and the former governor of the Bank of Canada, etc., all of whom have indicated, among a number of different things, that we are not saving enough for our retirement.
The hard fact is that the public pensions we have in existence were never meant to provide sufficient retirement income in and of themselves. Room was left for the private sector to fill, and that has not happened.
We have to pay attention to the official measure of poverty among seniors, because the whole point of having a pension system in the country is to do two things: prevent poverty in old age, and allow people to maintain their standard of living in retirement. Have we done that? The answer is no. The official measure of poverty among seniors in Canada that we praise ourselves for is 4.4%. It's one of the lowest rates in the OECD countries, but it's still over 200,000 people.
A better measure of poverty is the number of people whom the government is already providing some support to in the form of the GIS. Some 1.6 million Canadians are taking advantage of this income support program. This is the kind of measure indicating the people affected by lack of retirement income security.
Are they able to maintain their standard of living into old age? The fact remains that they don't. In his recent report, the Parliamentary Budget Officer indicated that the OAS rate, what he calls “elderly benefits”, is 14% of the average annual wage. If the OAS program is not enriched, the average benefit will fall by 60% to about 5.7% of the average annual wage by 2084. Now if that's too far into the future for us, then look at 2031, at which point the average benefit will have fallen to about 10%.
So people who are using or receiving public pensions, the way these are structured now without any enhancements—and the increase last year was exactly 0%—will fall behind and not participate in the increased living standard of everybody else.
While public pensions are proving to be insufficient to replace our pre-retirement incomes, you often hear people talk about how they have 70% income replacement at the lower rates. Think about it for a minute and you'll realize that when you combine the OAS and GIS, you will get about $14,000 in total. When somebody has a pre-retirement income of $15,000, certainly you are replacing 93% of their pre-retirement income. However, $14,000 is still well below the poverty line that we've set ourselves. So there's clearly a need to rely on third pillar savings, and that's the challenge we have to focus on.
Other economists have identified what we need to have saved by the time we want to retire, and they've made some frank calculations. To get an annual pension of $20,000, you have to have saved $283,000. If you want an $80,000 pension when you retire, you have to have $1.1 million, which is a lot more than some of us here have—and these numbers are not even indexed for inflation.
To figure out what this means for the average person, the C.D. Howe Institute has indicated that to get a pension that replaces 70% of your pre-retirement income at age 65, you will need to save between 10% and 20% of your pre-retirement earnings every year for 35 years. If we're not doing that, we will not have enough to live on. That's part of the problem.
It's for this reason that we believe it's absolutely important that we must understand, first of all, that we need to find consensus that something has to be done. Once we have found that consensus, then we can get down to the brass tacks of articulating what needs to be done. When we sit around the table at the pension summit that we are calling for, we have to ensure that retirees have knowledgeable representatives there.
Thank you very much.