Are You Retirement Ready?
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Are You Retirement Ready?

The Canadian Pension Plan (CPP) is an important part of your retirement income. Your union pension is another!

By Robert Brink, CLAC Representative

A prospective member once asked me this: “Why would I need a union pension? I’ll get CPP!”

I expect all sort of pushback when I meet with nonunionized workers to try to convince them to join CLAC, but I never expected to hear that one!

With so much information being thrown at us, from so many sources, it’s not surprising that some misunderstandings and myths float around, and the world of retirement savings is not immune. The fact is that the CPP is an important part of your retirement income but it’s not the only piece of retirement readiness. 

If you have been employed in Canada at all since 1966, you have made contributions to the CPP. In fact, you’ll see it on your weekly or biweekly paycheque as a deduction of 5.1 percent off your earnings up to an annual contribution maximum (currently 2,748.90). Your employer makes an identical contribution, and so the equivalent of 10.2 percent of your earnings goes into the fund. To dispel another myth, the CPP is sound and stable and will be around for generations to come.

There have been some recent enhancements to the CPP, including increases to contribution rates. In 2020, your contributions and your employer’s—both of which were at 4.95 percent for decades—are increasing to 5.25 percent. They’ll continue to increase slowly until 2023 when they will be 5.95 percent. The maximum annual contribution will also increase. The goal is for CPP to eventually—by mid-century—provide retirees with a monthly pension that replaces a third of the average work earnings, up from the previous goal of a quarter.

CPP, plus Old Age Security (OAS)—which goes to nearly all resident senior citizens, irrespective of work history—will get you a decent way toward retirement stability; but as I explained to the person above, it’s not enough. Everyone has different financial situations and retirement expectations, but wherever you’re at, your workplace retirement plans—negotiated and most often administered by your union—are a further key to retirement readiness.

The CLAC Pension Plan provides excellent investment returns and is efficiently run. CLAC’s Group RSP is also an efficient and flexible option in some sectors in western Canada. At your next proposal meeting, discuss with your colleagues and representatives about proposing an increase to your employer’s contribution to your retirement fund. Some sectors have less flexibility in this regard. In all cases, having the discussion is worthwhile. In many cases, it’s a great place to put your emphasis at the bargaining table.

Don’t forget, if you participate in a CLAC retirement plan through your workplace, you almost always have the option to make voluntary contributions beyond the negotiated contributions. This can be a great way to improve your retirement situation—whether you’re easing into your seventh decade on earth or a Gen Z member with miles of runway to go before taking off to Retirement Land.

 

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