Pension System Advantages And Disadvantages

Another reason to support the ORPP is that, historically, pensions in Canada have played a major role in promoting equality. According to Marier and Skinner (2008), the alternative to pensions is unattractive, a position based on the circumstances in Canada prior to World War 2 when older people had to work late into life of rely on the generosity of family members, something that is decreasingly likely today as an option given that older people for the first time have more money than the taxpayers who are supporting them. As Marier and Skinner (2008) note, the Canadian pension system has “its track record in combating inequality. Despite spending relatively little on old age pensions, Canada succeeds, through its basic and earnings-related

As Friedberg and Webb (2005) write, “defined benefit pension plans have become considerably less common since the early 1980s, while defined contribution plans have spread.” (p. 281). Defined contribution plans are those where the employee and company both make regular contributions into individual account s that are established with the pension payout being whatever is in those accounts. The problem with this sort of set up is that the actual future benefits are of an unknown value because they depend on whether or not the money in the accounts was invested wisely. In this sense, they are pensions to a large extent in name only. With the ORPP, it may be more prudent for some companies to shift from defined contribution plans to the government option due to the fact it offers greater

For instance, Tufts and Fairbanks (2011) write that “The Ontario Teachers ' Pension Plan (OTPP) has $107.5 billion in assets to fund 295,000 teacher pensions ($366,000 per retiree)” (p. 1). At the same time, the Canada Pension Plan (CPP), which is responsible for 18 million Canadian workers, has only $148 billion which is just $722 per retiree (Tufts and Fairbanks, 2011, p. 2). Looking to the private sector, Nortel in 2011 had a pension deficit of $2.4 billion. For Air Canada, the figure is $2.1 billion. U.S. Steele which was formerly known as Stelco, cut pensions by 15 percent. While the government tax base is being used to prop up public sector pensions, the same is not true for those in the public sector. It is little wonder that so much demand has been made for