CIBC CEO calls for additional, voluntary contributions to CPP to reignite
culture of savings
CIBC research shows nearly 6 million Canadians are at risk of a significant
decline in standard of living when they retire
TORONTO, Feb. 20, 2013 /CNW/ - Canadians should have the choice to make
additional, voluntary contributions to the Canada Pension Plan in order to
avoid facing a significant decline in living standards when they retire, said
Gerry McCaughey, President and CEO of CIBC in a keynote address at the
National Summit on Pension Reform.
He told the audience of senior government and business leaders in Fredericton,
New Brunswick that, according to new research conducted by CIBC's economics
group, nearly 6 million Canadians will face a drop in living standards of more
than 20 per cent if current savings rate trends continue.
"Our research found some 8.4 million people will experience a decline of more
than five per cent in their standard of living at retirement," said Mr.
McCaughey. "Far more troubling is the fact that 5.8 million Canadians are on
pace to experience a significant decline - meaning a reduction in living
standards of more than 20 per cent.
"And, here is perhaps the most alarming takeaway: when we look at those 5.8
million people - we see that most of them are young. In fact, our economists
estimate that almost 60 per cent of adults in their late 20s or early 30s, can
expect to experience a significant decline in their standard of living when
Mr. McCaughey noted that many of these young Canadians - especially those with
lower incomes - can't afford to buy the average home, so they will also be
deprived of the benefits of the forced savings represented by home ownership.
They're also coming of age in an era when private pension plans are
increasingly scarce. And they're finding it hard to replace what those private
plans offered: scale, obligatory participation, expert investment management,
locked-in contributions, a long-term horizon and certainty of outcome.
Mr. McCaughey thinks five imperatives should be incorporated into any
retirement savings solution:
1. It must be easy to understand and simple to participate in.
2. It needs to put the money of Canadians to work over the longest
possible horizon - as much as 40 years or more - to maximize
returns and grow savings.
3. It needs to be voluntary, but committed savings so after an
individual opts in annually, the money can't be touched until
retirement, giving it every opportunity to grow. These additional,
voluntary contributions would come from after tax income, similar
to the TSFA, and when withdrawn at retirement would neither be
taxable nor result in a loss of income tested benefits.
4. It needs to provide a predictable income stream at retirement-
providing a date-certain, amount-certain return to Canadians at
the conclusion of their working years.
5. It needs to take advantage of the benefits of scale - and the
incremental returns that are available from accessing high-quality
investment management that operates within a low cost structure
due to its size and scope.
Mr. McCaughey believes the Canada Pension Plan or a CPP-like vehicle can
deliver on all of these imperatives. "I believe that a reasonable starting
point, benefitting the greatest number of individuals, would be to allow
Canadians to increase their contributions to the CPP," says McCaughey. "We
need to provide Canadians with further choice - choice that gives them date
certainty and real dollar amount certainty. A choice that will help Canadians
as individuals, and Canada as a nation, reignite a culture of savings."
CIBC research shows that such a solution would help close the retirement
savings gap for young Canadians by as much as 80 per cent.
A copy of Mr. McCaughey's speech is available at:
The CIBC World Markets Economics report is available at:
CIBC is a leading North American financial institution with nearly 11 million
personal banking and business clients. CIBC offers a full range of products
and services through its comprehensive electronic banking network, branches
and offices across Canada, and has offices in the United States and around the
world. You can find other news releases and information about CIBC in our
Press Centre on our corporate website at www.cibc.com.
Kevin Dove, Head of External Communications at
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CO: Canadian Imperial Bank of Commerce
-0- Feb/20/2013 12:30 GMT
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