Struggling seniors, withering workplace pensions: Why Canadians support plans to expand CPP

By Dave Korzinski

July 5, 2016 – In June, after a summit with provincial and territorial finance ministers, the government announced an expansion of the Canada Pension Plan (CPP). At the time of the meeting the Angus Reid Institute found strong support for such an initiative.

When asked about the proposal to expand the CPP, most respondents (58%) favoured a “moderate expansion” of the program. Many would argue they got what they wanted.

The government announced a one per cent increase in the rate both workers and employers will contribute to the program – from 4.95 per cent to 5.95. This increase will be phased in beginning in 2019 and will grow incrementally until 2025 in order to minimize the burden on contributors.

Canadians will not only be devoting one per cent more of their income to the savings fund, many will now be contributing to a higher income level. The ministers also agreed to raise the yearly maximum pensionable earnings cap from the current cut off level of roughly $55,000 to an estimated $82,000 in 2025.

So it appears Canadians will be getting their wish – a mandated savings increase. But why do so many Canadians favour these reforms? There are a number of factors at play.

One-in-four struggle to make ends meet in retirement

One key motivation in the public’s desire for CPP expansion appears to be anxiety about making ends meet in retirement. More than one-in-four Canadians express this concern, and the proportion is nearly identical among both Canadians who have already retired and among those who are still working.

Roughly one-in-four (26%) retirees say that making ends meet is a struggle for them currently, while slightly more non-retirees (29%) say that they are expecting this struggle in the future. The largest number of Canadians – about half – say that they’re getting by (or expect to get by) without luxuries, while one-in-five say they can (or expect to) do everything they want in retirement without worrying:

As noted previously, approximately six-in-ten Canadians favour moderate CPP expansion, and this opinion holds for individuals who are already in retirement. In fact, retirees are slightly more likely to want a CPP expansion (83%) than semi-retired (80%) or non-retired (72%) Canadians. This could be because they’re more attuned to the financial strains old age can bring and seek to prevent it for later generations, or perhaps they know they won’t be bearing the costs for an expanded plan.

Retirees who are currently experiencing financial anxiety favour a “significant expansion” at a much higher rate (30%) than those who are currently more comfortable in their golden years.

In contrast, those with the least worry are more likely to favour no expansion at all – one-in-four (25%) take this position, three times higher than the “strugglers,” as seen in the following graph:

Canadians support expansion, regardless of awareness

As the federal government made the case for CPP expansion – including the issue in its election platform this past fall and convening last month’s meeting – many pro-business lobby organizations voiced opposition. The primary points of contention from opponents are that small-to-medium-sized businesses would be unable to afford the payroll tax increase that expansion will require of employers, and that the national economy is too fragile to endure such an increase right now. ARI asked Canadians how closely they had been following this discussion.

Among those who hadn’t seen, read or heard anything in the news leading up to the summit, six-in-ten (60%) support a moderate expansion. An identical number (60%) of those who were just scanning the headlines say the same. And among those following the debate more closely – reading stories and discussing with friends or family – 54 per cent lean toward the moderate approach. A full majority across the spectrum of awareness report the same sentiment.

Those more engaged on the issue do have one noteworthy diversion from the crowd, however, here nearly one-in-four say significant expansion is the avenue to pursue, notably higher than those who have been following the issue less closely:

Retirement climate, anxiety for those without workplace pension

The vast majority of Canadians – some 86 per cent – say they are concerned that individuals aren’t saving enough for retirement. This concern may help explain the widespread support for expanding the CPP.

Indeed, one of the factors contributing to worries that Canadians aren’t saving enough for retirement is the decline of workplace pensions. StatsCan data below shows this decline in workers with a registered pension plan through their employer:

A similar number of respondents to this Angus Reid Institute survey report having a workplace pension (44% do so), while the vast majority say they will be relying primarily upon their government pension for their needs – a combination of old age security and the CPP.

Therein lies the perceived importance of expanding the CPP.

There are certainly arguments about who will benefit from expansion. Older Canadians, for example, have not paid – and will not pay – at new rates for long enough to see the expansion bear fruit. That said, shrinking access to workplace pensions and the perception of under-saving appear to motivate Canadians of all ages to support government action on this file. (See comprehensive tables)

How important is the CPP to your retirement?

One additional way to gauge the importance of the CPP to Canadians is simply to ask them about it. On this question one-in-four (26%) say they plan to rely heavily upon their government pension, while half (50%) say it’s important and will definitely help. What remains is another quarter of the population who say they’re either relying mostly other savings (15%), not going to notice CPP benefits at all (4%) or not eligible to receive them (6%):

These views on the importance of the CPP help to explain the high levels of support for expanding it. Two-thirds (65%) of the largest group in the graph above (those who say the CPP will “definitely help” their retirement plans) said a moderate expansion was needed.

The lion’s share of opposition comes from much smaller groups: The 15 per cent who won’t rely on the CPP a great deal and the 5 per cent who say they won’t even notice it.

The debate surrounding the CPP is unlikely to die down. It rarely has since it was first implemented under the Pearson government in 1965. Canadians, however, appear to view the issue as somewhat less controversial. Three-quarters of Canadians say it is important for the government to play a lead role in ensuring retirement savings are adequate. This decision, then, should play well for the elected leaders who made it.

For the initial Angus Reid Institute release on CPP expansion visit www.angusreid.org/cpp-expansion

Click here for comprehensive data tables

Image Credit – Darryl Dyck/CP

Related Posts