Sunday, June 8, 2014

Liberal Pension Platform: A Fraud by Any Other Name Is Still a Fraud

- K.C. Adams - June 8, 2014

The Ontario Registered Pension Plan (ORPP) as outlined in the rejected Ontario Budget now forms part of the Liberal Party election platform. The ORPP as presented in the budget calls for an Ontario pension savings plan. It does not lead a battle to increase retirement security with defined benefits for the people of Ontario and across the country. It diverts from the growing struggle nationally to defend the pensions we have and fight for pensions for all. A major aspect of the proposal is capitulation to the federal Harper government's refusal to expand and strengthen the Canada Pension Plan as the core of a defined benefit pension guaranteeing retirement security for all.

The essence of the Liberal fraud is found in the budget's own words. "By targeting those most at risk of undersaving, particularly middle-income earners, the ORPP would help Ontario working families build a more secure retirement future."

The proposal would force workers and employers to put money into a province-wide pooled savings plan.

"Require equal contributions to be shared between employers and employees, not exceeding 1.9 per cent each (3.8 per cent combined) on earnings up to a maximum annual earnings threshold of $90,000."

The aim of the savings plan is "to provide a replacement rate of 15 per cent of an individual's earnings."

To receive the maximum from the savings plan, an "individual" would require "steady career earnings (in Ontario) over 40 years." Specific examples are given of workers working continually for 40 years earning $45,000, $70,000 and $90,000 annually.

"With a contribution rate of 1.9 per cent, Barbara (earning $45,000) would contribute about $788 annually to the ORPP, matched by her employer over her working career (of 40 years). In retirement, Barbara would receive: A maximum ORPP benefit of $6,410 annually for life; and Combined ORPP and CPP benefits of about $17,090 annually for life, replacing about 40 per cent of her pre-retirement income."

The poverty line in Ontario is now considered roughly $19,930 annually, which means Barbara would be officially living in poverty.

Employees with existing company pension plans are exempt from the ORPP. Most of those are the only ones with the kind of job stability given in the three examples, such as public sector workers but they are increasingly under attack from cutbacks and privatization. As well, the savings plan does not include the large percentage of workers deemed "self-employed."

"The government recognizes the unique status of self-employed individuals in the labour market as both employee and employer. The government will consult to determine how best to assist self- employed individuals in achieving a secure retirement future."

The government "recognizes" self-employment but how about "normal" unemployment now at 7.5 per cent and underemployment. In addition, Ontario has recently experienced layoffs from well paying jobs due to the ravages of deindustrialization and attacks on the public sector. The budget as well does not mention workers incapacitated from both workplace and outside workplace injury and illness who would be unable to continue in the Liberal savings plan. How dare the Ontario Liberals give average examples of workers with job stability of 40 years and earnings between $45,000 and $90,000! What Ontario are they living in? Such a fraud!

A key issue for the Liberal Party appears to be the declining savings rate of the working class and not pension security at all. Why workers are saving less is not investigated or discussed. A lack of savings directly results in less social capital available for the financial oligarchy to use as seed money in its private projects. This seems to be a major concern of the Liberals. The ORPP forces certain employees and employers to pay into the fund increasing the amount available as social capital, which is then used by private finance capital for its own purposes. This concern of lack of savings is highlighted in the Liberal budget.

"Voluntary Savings Are Inadequate

"Since two-thirds of Ontario's workers do not participate in a workplace pension plan, they must rely to a greater degree on personal savings.

"However, in 2012, there was about $730 billion in unused RRSP room in Canada, including $280 billion in Ontario alone. Among those with incomes between $25,000 and $75,000 who do contribute to RRSPs, average contributions have declined in recent years. A recent survey by Scotiabank indicated that only about three in ten Canadians planned to make an RRSP contribution in 2014, down from 39 per cent in previous years."

At best, the ORPP is meant to address a perceived problem of lack of savings and not security in retirement for all. But in fact, the aim is to amass a pool of capital to be used to invest in public funding of private projects under the high ideal of providing stability during retirement.

The conclusion is that the savings plan is a fraud and that the Ontario budget cannot and should not be considered progressive, as certain people and the mass media contend. The budget's ORPP is a diversion from mobilizing the people to fight for security in retirement for all and the basis that stability is a right from cradle to grave. This savings plan does not open a path to progress on this front. It is a savings plan to pool social capital for use by the financial oligarchy to further their narrow private interests. The budget and election platform continue the broad austerity offensive aimed at driving down living standards and trampling on workers' rights. In this election, the working class movement is determined to deny a majority government to both the Liberals and PCs.

(All quotations are from the rejected Ontario budget.)