Putting the Cart Back Behind the Horse

Ottawa and its provincial counterparts have begun offering additional retirement savings vehicles in recent months, namely the Pooled Retirement Pension Plan (PRPP). Nova Scotia, for instance, introduced PRPP legislation in October to “Provide a low-cost, regulated pension option for employers, employees, and the self-employed.”

There are few reasons to argue against government initiatives that making saving easy, however, when there are already a variety of excellent options available to individuals and their families, one begins to wonder whether something is missing from the equation. Consider someone who, despite working full-time, must spend each dollar they earn on necessities, i.e. food, shelter, transportation, etc. That person doesn’t have any income leftover to invest in a retirement fund, regardless of whether that fund is even available. Likewise, the unemployed, who, by assumption, do not have any income, needn’t worry about whether they should invest in a retirement fund. If one doesn’t have the money, one cannot invest it. More importantly, if more people are working, government-sponsored initiatives such as the Canada Pension Plan will operate more resiliently. In other words, the “issue” with government obsessing over retirement is that it puts the cart before the horse. Retirement is an important topic, and ensuring that retirees have some form of security is good public policy, but if there is a sizable chunk of folks who aren’t working, or who are underemployed, creating new savings vehicles will not help them. Creating opportunities for them to gain employment will, though, and pro-growth public policy is a start.

Lastly, financial literacy is an important aspect of any economy and, unfortunately, there is a dearth of it in Canada, especially among younger individuals. Teaching our generation to understand basic finance, e.g. interest rates, would help individuals garner a better understanding of the options available to them. In the words of John Dunsworth, who famously plays the drunk Jim Lahey on Trailer Park Boys, “Right from school we should be taught about interest rates, we should be taught that if you put away 10 percent of all your earnings, by the time you’re 50 you’ll be independent. This job is yours to do. You have to do it. You can’t depend on the state.”

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