Changes to the Canada and Quebec Pension Plans, the Liberal election platform boasts, have placed "our public pension system on a stable and sustainable footing." In addition, the new, income-tested Seniors' Benefit, soon to replace the tandem of benefits known as Old Age Security and the Guaranteed Income Supplement, will "ensure that our pension and benefits system will continue to be there for all Canadians." Er, not quite. Despite, or in some cases because of the Liberal reforms, the programs still suffer from a number of serious design flaws. Together with continuing restrictions on tax-sheltered private retirement savings plans, their combined effect is to leave the post-employment plans of younger Canadians on a decidedly shaky foundation.

Start with the Seniors' Benefit, unveiled in the 1996 budget. Most experts agree that the OAS/GIS muddle was in need of rationalization. While the GIS is income-tested, the OAS, even after the Tory "clawback," remains essentially a universal program: the clawback applies to individual, not household income, and only starts to kick in at about $53,000 in income.

But look at what replaced it. For openers, the reformed system, which sharply reduces benefits to those on middle and upper incomes, does not apply to current recipients, nor to anyone 60 or over as of Dec. 31, 1995 -- the legacy of the Prime Minister's spur-of-the-moment pledge during the referendum that existing pensioners' benefits would not be cut.

That sounds fair -- current retirees would have little opportunity to make up the loss of benefits out of other income -- until you consider the plight of those on the boundary between the two regimes: turn 65 on Dec. 31, 2000, and you keep your OAS; turn 65 a day later, and you lose several thousand dollars in benefits, depending on your income.

By exempting a whole generation from the reforms, the government was left scrambling for some way to recoup the savings that were supposed to flow from the new system. It found them by clawing back the new benefit at punishingly high rates: 50 per cent on the first $12,520 of other income, 20 per cent on every dollar after $25,921. You're still better off with the benefit than without, and those on low income, notwithstanding the high payback ratio, stand to clear more from the Seniors' Benefit than they would have from OAS and GIS.

But for middle income savers, the clawback's effects may well be perverse.

Twenty per cent doesn't sound like much, until you remember that's on top of federal and provincial income taxes: A wage-earner in the 40 per cent marginal tax bracket would pay an effective tax rate of 60 per cent on the same income after retirement, factoring in the reduction in benefits. You can imagine what this would do for his incentive to save for retirement: by socking a dollar away in his RRSP, he would save 40 cents in tax, only to pay 60 cents on the same dollar when the time came to withdraw it.

But then, that will be an increasingly irrelevant consideration, since less and less of his savings will be spared from tax to begin with. By now, the absolute dollar ceiling on RRSP contributions was supposed to have reached $15,500, thereafter to rise in line with inflation. Instead, it has been frozen at $13,500 until 2003. Any savings above that amount will be taxed at regular rates, having been saved out of income that was taxed once already. So even as it is cutting the public plan, the government is restricting the ability of Canadians to save for their own retirement.

Of course, for many Canadians on modest income, the issue of double- taxation of savings will itself become moot: with contributions to the Canada and Quebec Pension Plans scheduled to nearly double in the next few years, they won't have much money left to save. Indeed, some may find they have no money at all, given the toxic effects of rising payroll taxes on employment.

Few would dispute the need to more fully fund the CPP/QPP, and hence to raise contribution rates. But, as Prof. James Pesando of the University of Toronto points out in a recent paper for the C. D. Howe Institute, were contributions directed to individual employees' RRSPs, rather than into the CPP sinkhole, the effects on employment might not be so dire: instead of sticking employers with the cost of rising contributions, workers would be more willing to absorb the increase in the form of lower wages, knowing they would be repaid with higher benefits in retirement.

Alas, that reform option appears to have been closed off; the government seems in no mood to continue the debate. The problems, you see, have all been solved.