“As far as your personal goals are and what you actually want to do with your life, it should never have to do with the government. You should never depend on the government for your retirement, your financial security, for anything. If you do, you're screwed.” – Dave Carey
Despite, Alberta Finance Minister Doug Horner’s assertion regarding Alberta’s government pensions, that “there is no crisis today” there certainly is a crisis looming if we don’t take action today. Horner is to be commended for seeing the writing on the wall and taking action now before the crisis comes down on Alberta taxpayers.
It is certain that we all need to examine our retirement situation for the simple reason that our life expectancy has increased dramatically in the last several decades. When the Canada Pension Plan was introduced in 1965 a person was expected to have a seven or eight-year retirement. Today it is normal for retirees to enjoy 20 years of retirement.
From an actuarial point of view the CPP would have been drastically underfunded if the federal government had not doubled the contribution level a few years back. Fortunately it is now in good shape partly as a result of the wise investment strategy of the Canada Pension Plan Investment Board.
If the Old Age Security benefit, which was introduced in 1927, had been established on an actuarial basis, it would have been even more out of touch with reality. Especially since it is funded from general revenues of the federal government, i.e. from taxpayers’ pockets, it was very prudent for the federal government to take action to extend the entitlement date to age 67, albeit that will not happen for another 10 years.
The reforms of these two major pension or retirement security funds are a definite signal that the Alberta government is on the right track to look at pension reforms for government employees. No longer is it reasonable to expect that employees can retire at age 55 with a full pension that may continue for 30 years or so. Government, as manager of taxpayers’ dollars, must ensure that pension plans are sustainable and that future taxpayers are not faced with massive unfunded liabilities.
Even though the introduction of the Canada Pension Plan in 1965 was a good thing it probably induced a false sense of security in many baby boomers, in that there was a sense that their retirement was being looked after by the government. Unfortunately that is not the case. CPP only provides a small retirement benefit that is not and should never have been expected to be sufficient for a person to enjoy a dignified retirement lifestyle.
On the other hand, the Registered Retirement Savings Plan introduced in 1957 provided a strong incentive for individuals, particularly those who were not beneficiaries of either a private or public pension plan, to receive tax exemptions for putting money away in an RRSP as a means to save for their retirement. Despite the fact that RRSPs were really a form of tax deferral, they do provide the opportunity to grow your capital tax-free within the plan.
With the combination of CPP, OAS, public or private pension plans, RRSPs and private investment savings, responsible Albertans have the means to provide for a respectable retirement. Unfortunately there are some who have not planned well enough for a lengthy retirement and may outlive their retirement savings and hence be forced to rely on the rather meagre assistance provided by government plans.
To sum things up I think this quote from George Foreman is appropriate:
“I don't even think about a retirement program because I'm working for the Lord, for the Almighty. And even thought the Lord's pay isn't very high, his retirement program is, you might say, out of this world.”
Ken Allred is a former St. Albert Alderman and MLA
