Saturday, January 29, 2011

Please, No More CPP Premium Hikes!

Mr. Flaherty, please don't sell us out! Don't bring us another tax hike just to postpone an election by a mere year...
In a new memo prepared by the NDP, the party costs its main requests. The NDP wants the budget to include $700-million to raise the Guaranteed Income Supplement for low-income seniors; a doubling of the Canada Pension Plan benefit through higher premiums; a $700-million proposal to cut the GST on home heating fuels; $200-million to revive the home energy retrofit incentive, and longer-term pledges to improve health care.

Mr. Flaherty’s office has already rejected the NDP proposal on CPP. Changing the CPP requires the support of two-thirds of the provinces representing two-thirds of the population. Recent federal-provincial meetings have shown there is not currently enough support to move ahead with even a less expensive version of the NDP plan, which was originally advocated by the Canadian Labour Congress. The Conservatives are on record, however, as supporting further talks on increasing CPP benefits.
So, it's just the matter of getting the provinces on board? The governing party (the one with the word "Conservative" in its name) has absolutely no principle objections to the plan?

I've said it before and I'll say it again. The CPP with its "pay as you go" principle is one of the least efficient retirement savings vehicles. We've already seen the premiums going up from 3.6% in 1986 to 5.6% in 1996 and to 9.9% in 2003, (employee and employer share combined,) just to maintain the benefits at their current level. If your financial adviser recommended you to nearly triple your contributions with absolutely no increase in benefits to say the least - would you agree? Well, with the CPP, we have no choice. Now, they want to boost the premiums even higher, under a vague promise of higher benefits. Do you believe them? I don't. I'd rather have my retirement savings in a privately-managed account over which I could have direct control.

So here's my suggestion: Instead of throwing even more of our money into this bottomless pit otherwise known as CPP, let people put more of their money into retirement savings. Currently, the RRSP limit is 18% (up to $22450) - make it at least 25%, preferably - 30%. Fix the rules concerning retirement allowances, so that people could roll them over to their RRSPs with no hassle. Give people more opportunities to save for retirement - that will work much better than raising premiums of an inefficient forced saving plan.

No comments: