Surprise! Harper has already instituted his 8 point pension reform plan.

Given the hyper public awareness on the matter of pension reform on the part of a vast number of Canadians and Canadian politicians, and justly so, you should be comforted (or not?) in knowing that Stephen Harper has already instituted, by stealth, his eight point pension reform plan, by:

(1) Decimating retirement savings. Never before in the history of western democracies has a government willfully and knowingly acted in a way that destroyed the retirement savings of its citizenry. After promising in writing during the 2006 election that he would never “raid seniors nest eggs by taxing income trusts”, Stephen Harper did that very thing on behalf of narrow self interests by using the patently false argument that income trust cause tea leakage. This caused investors saving for retirement to permanently lose $35 billion of their retirement savings and a permanent loss of value. The Canada Pension Plan lost $300 million of this $35 billion, as such all Canadians experienced a loss of their retirement savings on at least one level. About 90% of the business journalists accepted that argument on blind faith and reported this lie as if it were some god given truth.

(2) Destroying an investment vehicle/alternative most well suited to retirement savings. Income trusts were a natural evolutionary outcome in the Canadian capital markets that was in direct response to the need for an investment vehicle that provided income and at the same time allowed for equity type returns as well as inflation protection and the absence of reinvestment risks associated with traditional corporate bonds, by virtue of their fixed maturity. Don’ take my word for it, here is an excerpt from an Ontario Teachers’ press release of November 1, 2006: “The reality is that, in a protracted period of low interest rates, it is important to find alternate investments with yields that help make up the difference. Income trusts have allowed us to do that in recent years. The challenge will be to find the investment vehicles that will replace the income and cash flow that income trusts have represented to us.” So what did Stephen Harper have in mind for the average Canadian as a substitute for income trusts, if not products like Manulife’s Income Plus launched the week of November 1, 2006? See item (5).

(3) Creating a two tiered pension system, Part 1 In order not to confront the pension plans, Harper carved out a special exemption from his draconian 31.5% income trust tax, by allowing the pension funds to own these same trusts privately and not pay the tax or be subject to Harper’s arbitrary growth restrictions. This is called a tax arbitrage and is the surest way to may money, by creating a two tired system, in which one group is taxes (RRSPs) and the other group is not (pension funds). This is why the Public Sector Pension Plan bought Thunder Energy Trust and why OMERs bought Teranet Income Fund and Golf Town Income Fund and it is why the CEO of OMERs said buying more public income funds and taking them private will be a big focus for OMERs in 2009 and 2010. Why not? Let the rip-off continue unabated.

(4) Creating a two tiered pension system, Part 2. In a feigned and again fraudulent attempt to ameliorate the losses incurred by his underhanded income trust double taxation of RRSPs, Harper needed some political refuge, so he came up with the concept of pension income splitting for seniors. Unfortunately, the operative word once again with pension income splitting for seniors is "pension" income, meaning you have to have a pension and "pension income" to benefit from this huge tax break. Therefore the group most negatively affected by the trust tax, i.e. those seniors without pensions, are not the ones receiving Harper's salve of income splitting. This is another gross example of Harper's ushering in of a two tiered pension system, where only 14% of seniors actually benefit (himself included as well as Canada's 308 MPs and Senators with spouses). The other 86% can go pound sand.

(5) Backing the wrong horse, requiring bailouts and undermining Canada's financial system. The income trust tax was brought into effect by extremely heavy lobbying by Canada’s life insurance industry who were having a hard time selling their investment products in the face of the formidable competitor known as income trusts. By killing income trusts, a lot of investment dollars that would have gone into Canada’s real economy were diverted into synthetic/ derivative investment products life variable rate annuities ( eg. Manulife’s Income Plus) , a product that Warren Buffett referred to as “crazy” from the standpoint of the life insurers who issued them, given the difficulty of hedging the inherent risks of these products. Imagine what Warren Buffett would have called Manulife, who didn’t attempt to hedge these products at all, which was the cause of their 75% loss in market value, which necessitated a major capital infusion or over $4 billion in capital. Capital that would have better served the economy had it gone elsewhere, rather than stabilizing an uninsured insurer. The Canadian life insurance companies are also now receiving government assistance in terms of the Canadian Life Insurers Assurance Facility, which provides government subsidies to life insurers to ensure their cost of borrowing. As such Canadian tax payers are subsidizing the shareholders of life insurance companies, at the same time that unitholders of income trust are being double taxes at the rate of 31.5% and subject to growth constraints.

(6) Undermining the RRSP. The creation by Jim Flaherty of the Tax Free Savings Plan (TFSP) was simply an indirect way to undermine the use of the RRSP by the 75% of Canadians who are not members of employer pensions and who can only replicate the tax benefits of an employer pension through use of the RRSP. The government considers the tax deferral of RRSPs to be a “cost” to it, even though the Government’s accounts are conducted on an accrual basis. The same logic that considers RRSPs to be a cost to the government is the logic that drives the fallacious argument that “income trusts cause tax leakage”. The sole purpose therefore of the TFSP is not to provide Canadians with assistance in terms of saving for retirement, but rather to dissuade more Canadians from making use of their RRSP. Since the government’s faulty logic is that RRSPs are “costing” the sitting government a loss of tax revenue, then a TFSP is not costing the sitting government to lose any tax revenue, as the benefits of a TFSP will come at the cost of future governments. Unlike RRSPs which are only a deferral of tax revenue, the TFSP is a permanent loss of tax revenue. This shows the quality of the thinking that goes on in Ottawa and in the inexperienced mind of one Stephen Harper.

(7) Reducing entitlements under the Canada Pension Plan. Stephen Harper has reduced the entitlements to Canadians opting to receive their CPP benefits at the age of 60 by 6%, by imposing a 36% discount from the full entitlement at age 65 from the present 30% discount.

(8) Bailing out select pension plans, but not others. In today's news: "GM will use $4-billion of the Canadian loans to address the shortfall in its pension plans. In addition, the company will inject $200-million into the pension plans over the next five years, making them fully solvent."