Sunday, August 2, 2009

Social Security in Canada and USA

Whilst living in Canada I always thought that my retirement would be secure. I had the illusion that Canada cared for its citizens more than most countries, and paid especial attention to its seniors. From an outside perspective, I thought that the USA was not as concerned about the well being of its citizens until I came to live in the USA. Now I know that there is more concern here for seniors than exists in Canada. Mainly due to a failure of the Canadian government to take action to protect the pensions of seniors and to ensure that they have adequate income when they retire.

It came as a big surprise to many people when their companies went into bankruptcy and their defined pension benefits suffered as a result of Canada’s lack of insurance protection. Not so in the US or the UK where government sponsored agencies protect the pensioners by requiring companies offering defined benefit pension plans, to pay insurance premiums to protect against that very eventuality. The PBGC in the US has saved millions of pensioners from losing out, and in the UK the PPF has provided the same type of safety net.

Social security in the US is also far more than offered in Canada. Having worked and contributed for 18 years in each country I am eligible for social security in the US and the CPP in Canada. However the amount of social security I am paid in the US is three times what I could receive from Canada. Additionally my wife is entitled to half of what I receive from social security when she reaches retirement age.

The difference between these plans is due to the mandatory deductions required by each government. But the fact that Canada doesn’t require a large enough savings plan for retirement is inexcusable, especially in light of the very high income tax rate already paid by her citizens and applied to other programs.

I realize that Canada also offers an old age pension, but even when combined with the CPP, the sum is far smaller than what is provided by US social Security. I really don’t understand the reasoning that Canada’s government has used to create this shameful situation. It is even further confusing to find that the elected officials are dragging their feet, and balking at correcting the pension protection situation.

Isn’t it time that a Canadian agency was established to provide protection for retirees and future retirees who are depending on the defined benefits promised to them? These benefits are not perks or special treatment; they are part of the compensation package that the employers agreed to provide to employees. They should be fully protected and in the event of bankruptcy they should be given first priority on any assets that are left, to ensure the pension trust funds are fully funded.

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