Canada's Billion Dollar Pension Scandal

Author:  Earle Beattie In Consultation With Tom Delaney

dscf0040Heavy borrowing from governments has shortchanged pensioners out of receiving better retirement benefits from the Canada Pension Plan.

On June 4th 1964, Ottawa and Quebec reached a historic agreement on two separate plans, one for Quebec, the QPP and one for the other nine provinces and territories, the Canada Pension Plan. The Canada Pension Plan, which provides assistance to Canadian workers in the event of death or retirement, began operating in 1966. The CPP is a pay - as - you go plan and the contributions by employers and employees are used to make payouts to retired workers. The plan is federal and is locked into a system that allows all participating provinces to legally borrow money at favorable rates. Provinces are using pension money in order to fund capital projects. The Canada Pension Plan ends up benefiting the government more than the citizens it is suppose to serve.

 "Federal and provincial governments rob retired persons by financing public works projects through the Canada Pension Plan - a case of the needy helping the un-needy. Through a cozy agreement in 1966, the Canadian government arranged to lend all provinces billions of dollars at rates below the capital market for roads, buildings, and other such projects. This is money that pensioners can ill afford, that might be used to enrich their pensions or otherwise expand benefits. To make matters worse, the loans - amounting to a little over $25 billion - have been more or less regarded as "free money". Ie: paper transactions, where there is little or no chance of repayment. In fact, provinces may "borrow" more from the same source."                                                                                                                      Preface: A Trust Betrayed, a Blow at Pensions and a New Power Bloc 

Increasing the contribution rate will simply allow provinces to borrow even greater amounts at lower rates. A surcharge should be applied to high - income earners in order to transfer funds to low or no income people. Universality and the borrowing of money by the provinces from the Canada Pension Plan should be eliminated. The savings generated as a result should be applied to increasing the benefits for retirees.

Earle Beattie spent the earlier part of his career as a journalist and editor. He helped set up the journalism department at Ryerson University. He also taught at the University of Western Ontario and York University in Toronto.

Tom Delaney is a financial consultant and widely recognized as an expert on pensions. He has appeared before parliamentary committees on pension legislation.

 

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