Retirement age needs to be raised, Canadian Taxpayer Federation argues.

OTTAWA -- The Canada Pension Plan and the mandatory retirement age of 65 years needs to be restructured says a report of the Canadian Taxpayers Federation.

The Canada Pension Plan as it is currently structured is unfair to young contributors born between 1990 or 2000 while CPP taxes are higher than ever before, costing Canadians an extra $41.2 billion over a five-year period from 1997 to 2003.

The report, Fair Pensions for Future Generations, Tripled Tax Rates & Prospects for Reform, A taxpayer's Guide to the Canada Pension Plan, was researched and authored by former CTF'S B.C. director Mark Milke and author of the CTF book, Tax Me I'm Canadian.

In this Milke contends that Canada's Pension Plan along with the current mandatory retirement age of 65 years needs overhauling to make CPP fairer to younger workers, to reduce the tax burden on individuals and employers and to make the retirement age more in line with an increased life span of four years.

He notes that for those born in 1930, the real rate of return on CPP contributions is almost five times those that will accrue for individuals born in 1990 or 2000 while Canadians born in 1950 garner real rates of return double that of future generations.

Also, he argues Canadians currently face a greater tax burden than they did in 1966 when the pension plan was created. At its start, the CPP tax rate was set at 3.6 per cent of contributory earnings which was split between employees and employers equally. But since 1986 CPP taxes began to rise and continued to do so while at the same time Employment Insurance taxes were reduced. During the last decade, CPP taxes rose faster with employees who earn $41,000 paying an annual CCP rate of $817 more in 2003 than in 1992. Their employers also paid an extra $701 per employee in 2003 than in 1992.

Milke also says instead of reforming CPP expenditures, the federal government in its post-1997 reforms concentrated on raising CPP taxes, and even though the definition for disability claims was narrowed, "little else was done to control costs."

Further unlike other OECD countries, Canada has still not changed its mandatory retirement age from 65 years to 69, which is the same as it was when CPP was conceived almost four decades ago. Other countries that are moving beyond a retirement age of 65 include Norway, Iceland, Germany and the United States while others such as Japan, Italy, Britain and New Zealand are moving to adopt Canada's official retirement age.

Among his ten recommendations for changes to CPP, the author advocates a system whereby individual CPP portions are transferred to private sector RRSP-style accounts that cannot be withdrawn until the official retirement age. He urges that the official retirement age be increased from 65 years to 69 years of age over a 16-year period in three-month increments yearly beginning in 2005 and finishing in 2020.

The Canadian Taxpayer Federation is an advocate of less government programs and reduced taxes.