Skip to main content

Recently, the Federal, provincial and territorial finance ministers have reached an agreement this year to expand the Canadian Pension Plan and address the shortfall in middle-income retirement planning by increasing contribution rates.

Based on Statistics Canada data, the Globe and Mail's article on CPP reform reports that about 48% of men were covered by defined-benefit plans in 1971, and the portion had fallen nearly by half to 25% in 2011 (women have also been hit by declining coverage, but more of them work in the public sector, where defined-benefit plans are still the norm, so their slide has been less severe).

Also, four studies predict the future standard of living at retirement and all conclude a significant decline:

  • 2015 McKinsey report uses survey results and concludes that 17% of households are not on track for retirement
  • 2011 study from the Institute for Research on Public Policy uses the LifePaths model and shows a 50% decline on the standard of living
  • A 2010 study by the C.D. Howe Institute suggests 44% of current 25-30 year olds risk a reduction in the standard of living
  • 2009 study prepared on Retirement Income Adequacy uses income tax data and concludes a 22% decline for those born between 1945 and 1970

However, the Fraser Institute made an analysis on the CPP expansion, arguing that the Federal government has failed to make a convincing case for CPP expansion - that the government’s analysis does not account for decreased spending as people age, thus overestimating how much Canadians need to save for retirement.

Robert L. Brown responds to this analysis in his blog Canadians Will Retire In Uncertainty If We Don't Act Now, criticising the Fraser Institute because "their viewpoint depends heavily on trying to determine how much income Canadians need to retire with dignity" and that "if we are to act... an efficient and effective... benefit plan... just so happens to look a lot like an expanded CPP."

Read more about CPP expansion from the Canadian Department of Finance here: Background on Agreement in Principle on Canada Pension Plan Enhancement