Here's what the government could do to protect retired professionals from inflation JIM GARNER
Things aren't what they used to be, and almost any physician who retired 10 years ago on what then seemed an adequate income will tell you so. Particularly badly hit are those who took advantage of the government's policies to build up funds in a registered retirement savings plan (RRSP) and then converted the nestegg into an annuity. That annuity has remained at the same dollar level since; the consumer price index (CPI) rose by 98% from November 1968 to November 1978. At the recent hearings of the Senate committee on retirement age policies the formal brief for the Government of Canada came from the minister of national health and welfare, Monique Begin. Much of her concern, rightly, was for those over 65 who have poverty-level incomes - 54% of all pensioners, she told the committee, are poor enough to be receiving guaranteed income supplement payments, and 19% are totally dependent on these supplements and the old age pension. Miss B6gin blamed the elderly's lack of income primarily on failure of employer-sponsored pensions to produce adequate retirement income. She mentioned incomplete coverage, inadequate portability and vesting arrangements, lack of survivor benefits and the failure to index pensions as the most serious problems. While we can applaud these thoughts, we also have to deplore the lack of attention to those who fund
their own retirement incomes physicians, dentists, lawyers, shopkeepers and other self-employed people. Because while there has been a steady, if slow, approach toward a better deal for the retired-but-for-
QITAWA FILE merly-employed, provision for the self-funding of retirement income is still for the most part back in the preinflation era. The government has adopted certain measures to bring its retirement income policies into the 1970s. Old age pension and Canada Pension Plan payments are now indexed to the CPI. The pensions of its own employees and MPs are indexed. And last year Finance Minister Chr.tien introduced a plan under which a crude form of variable (and increasing) retirement income could be secured from the proceeds of an RRSP. So the government is at least making noises in favour of programs that enable the elderly to live on incomes of constant value. What seems to be lacking is a sense of urgency - a situation not unexpected when those with the power to deal with the problem, bureaucrats and MPs, are themselves insulated from it by their own indexed pensions. Even those employed persons who do not have indexed pensions from
184 CMA JOURNAL/JANUARY 20, 1979/VOL. 120
their employer can be substantially better off than self-employed professionals - a point that the CMA has already made to the minister of finance. The association proposed a substantial increase in the present $5500 maximum yearly contribution, indexing of contribution levels, additional allowable deductions at greater ages to offset inflation and an alternative to purchase of a lifetime annuity at 71 or retirement. Chr.tien did produce something that partly met the last request, but his retirement fund concept is pretty unsatisfactory. Could RRSP annuities be indexed? Given the political will, they could, and this would solve many of the problems of the retired self-employed. What would be necessary would be for the government to follow the lead of other countries such as Brazil and the United Kingdom and issue saving bonds, indexed both for principal and interest. This would not be excessively expensive. The take in sales and income taxes is linked to inflation; to have the repayments on government debt instruments similarly linked would merely eliminate at least some of the immoral profit the treasury now makes out of inflation. Such indexed bonds, held by RRSPs and the purveyors of annuities, would effectively allow selffunded retirement income programs to function the way Parliament intended when it first passed the legislation.E
Things aren't what they used to be, and almost any physician who retired 10 years ago on what then seemed an adequate income will tell you so. Particularly badly hit are those who took advantage of the government's policies to build up funds in a registered retirement savings plan (RRSP) and then converted the nestegg into an annuity. That annuity has remained at the same dollar level since; the consumer price index (CPI) rose by 98% from November 1968 to November 1978. At the recent hearings of the Senate committee on retirement age policies the formal brief for the Government of Canada came from the minister of national health and welfare, Monique Begin. Much of her concern, rightly, was for those over 65 who have poverty-level incomes - 54% of all pensioners, she told the committee, are poor enough to be receiving guaranteed income supplement payments, and 19% are totally dependent on these supplements and the old age pension. Miss B6gin blamed the elderly's lack of income primarily on failure of employer-sponsored pensions to produce adequate retirement income. She mentioned incomplete coverage, inadequate portability and vesting arrangements, lack of survivor benefits and the failure to index pensions as the most serious problems. While we can applaud these thoughts, we also have to deplore the lack of attention to those who fund
their own retirement incomes physicians, dentists, lawyers, shopkeepers and other self-employed people. Because while there has been a steady, if slow, approach toward a better deal for the retired-but-for-
QITAWA FILE merly-employed, provision for the self-funding of retirement income is still for the most part back in the preinflation era. The government has adopted certain measures to bring its retirement income policies into the 1970s. Old age pension and Canada Pension Plan payments are now indexed to the CPI. The pensions of its own employees and MPs are indexed. And last year Finance Minister Chr.tien introduced a plan under which a crude form of variable (and increasing) retirement income could be secured from the proceeds of an RRSP. So the government is at least making noises in favour of programs that enable the elderly to live on incomes of constant value. What seems to be lacking is a sense of urgency - a situation not unexpected when those with the power to deal with the problem, bureaucrats and MPs, are themselves insulated from it by their own indexed pensions. Even those employed persons who do not have indexed pensions from
184 CMA JOURNAL/JANUARY 20, 1979/VOL. 120
their employer can be substantially better off than self-employed professionals - a point that the CMA has already made to the minister of finance. The association proposed a substantial increase in the present $5500 maximum yearly contribution, indexing of contribution levels, additional allowable deductions at greater ages to offset inflation and an alternative to purchase of a lifetime annuity at 71 or retirement. Chr.tien did produce something that partly met the last request, but his retirement fund concept is pretty unsatisfactory. Could RRSP annuities be indexed? Given the political will, they could, and this would solve many of the problems of the retired self-employed. What would be necessary would be for the government to follow the lead of other countries such as Brazil and the United Kingdom and issue saving bonds, indexed both for principal and interest. This would not be excessively expensive. The take in sales and income taxes is linked to inflation; to have the repayments on government debt instruments similarly linked would merely eliminate at least some of the immoral profit the treasury now makes out of inflation. Such indexed bonds, held by RRSPs and the purveyors of annuities, would effectively allow selffunded retirement income programs to function the way Parliament intended when it first passed the legislation.E
