Pension Reform

For the past while the feds have been giving a bit of lip service to the idea of pension reform. It seems they finally woke up to the fact that many boomers are either recently retired or soon to retire and failed to, or were unable to plan for their sunset years. The result is that these old buggers either stay in the work force or return to work when they wake up to the fact that the little nest egg just isn't cuttin' it. When old guys aren't falling off one end of the employment ladder there's no room for young guys to climb on to the other.  Both groups suffer.  The dream of old guys to retire to a sandy beach sinks like the sunsets they were hoping to see.  Young guys who hit the books and got an education line up for night shift jobs at Tim's and Mikey D's.  Their Grandmas have all the day shifts.

No surprise that any pension reform suggested by government will involve either, or both, increased taxes and increased plan contributions.  It's likely that any increase in CPP benefits would not affect present CPP recipients.  Rather, the increase would kick in  for future retirees.  This means that retired boomers would be subject to higher taxes without participating in increased benefits.  Thus, the group whose very dilemma triggered the need for reform would be left out in the cold.

Nobody wants higher taxes, especially retirees living on fixed incomes or under-employed young people.  The business community, according to the C of C, is totally opposed to increased contributions.  As you know, for each dollar individuals contribute to CPP, their employer is compelled to match it.  I suspect that the greatest fear among business is that the feds will change the rules and make employers contribute $1.40 for each employee $1.00 as is the case with EI premiums.  This would be a 40% increase in employers' contributions.

Now, here are my ideas;

1. Remove the $5,000.00 annual cap for deposits to Tax Free Savings Accounts for retirees.  If a larger portion of the investment income, earned on unregistered funds, were free of tax this would effectively provide additional income for this group without increasing either taxes or contributions.  I'd expect there would have to be some sort of means test for this.  Gazillionaires shouldn't be included.
2. Increase the Pension Income Tax Credit.  Again, this would reduce taxes for those who need the break without affecting others.  Once again, Richie Rich shouldn't be included in this program. 
3. Tax-Free Muni Bonds.  South of the border, interest paid on Municipal Bonds is generally exempt from federal and state taxes.  Again, this would be great for retirees.  It would be huge for the municipalities who would have access to a whole new source of funding for infrastructure renewal and capital expenditures, without going to the feds or the provinces as is now the norm.  The resultant reduction of income tax would easily be replaced by normal taxation of the income produced by the increased economic activity.  A win, win!

If you like these ideas, send the link on to your MP.  Maybe we can start a grassroots movement.