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Monday, June 14, 2010

Canadian Pension Reform

Coat of arms of Prince Edward IslandImage via Wikipedia

Pension reform is the focus for Canada’s provincial and federal finance ministers this week in Charlottetown P.E.I. If Canadian seniors are to maintain a standard of living above the poverty level, pension reform is a must. The traditional benchmark (to maintain a respectable standard of living) of 60 to 70 per cent replacement of pre-retirement income is becoming increasingly difficult for Canadians to obtain.

Canadian Seniors have seen their personal debt levels rise, their savings reduced and a unstable stock market contribute to a reduction in their standard of living.

The Canadian Labour Congress has suggested that the average monthly pension benefit be doubled from its current $502.57. This has brought howls of protests from Canadian Federation of Independent Business. They claim that increasing the CPP premiums paid by employers will result in job losses and severely affect the economic recovery. In addition self-employed people would see a significant increase in their Canada Pension Plan premiums as they pay both employer and employee contributions.

Canadian finance minister Jim Flaherty understands the need for pension reform but prefers modest increases in Canada Pension Plan payroll premiums that would be phased in over a number of years.

Whatever the finance ministers agree to they have a difficult threshold to meet. In order to make any changes, Parliament and two-thirds of the provinces with two-thirds of the population must agree.

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