A greater focus and planning and required around three fundamental issues to ensure a more secure retirement system in Canada, says a report.
Canada’s Public Policy Forum report, Retirement Security for Everyone, says the following three actions will improve coverage and access in Canada’s retirement income system.
Target specific action and work together
“Policy-makers, pension providers, employers, labour representatives and other recognized pension experts need be in agreement on who is at greatest risk of having insufficient income during retirement,” the report states. “Reaching a common understanding of who is most ‘at risk’ helps focus attention on developing a balanced, effective policy response.”
At the Second National Pension Summit, a consensus emerged among participants that middle-income earners who undersave are the foremost at-risk group. On average, the at-risk groups—which include a sizable number of middle-income earners in the private sector and young Canadians—are less likely to be enrolled in a workplace pension plan or saving enough to ensure income security during their retirement. These groups often don’t have the requisite financial literacy skills to sift through the many financial options available to them.
Sharpen the tools
It’s also clear leadership and co-ordination across the government, business, labour and academic sectors are needed to provide greater coverage to Canada’s at-risk groups, says the report.
Rather than seek to adopt a silver-bullet approach or overhaul a multi-pillared pension system that serves Canadians relatively well, it recommends stakeholders should provide a range of options that are flexible enough to accommodate individual circumstances.
Developing a better understanding of the circumstances facing each at-risk group will better position decision-makers to create effective solutions while mitigating unintended consequences. To ensure greater buy-in among all stakeholders, these solutions should be multi-sector and intergenerationally equitable. Such a co-ordinated approach would also be helpful in ensuring greater consistency and fluidity between programs, the report notes.
Establish a culture of knowledge sharing
Confusion among Canadians is widespread. The variety of different investment vehicles makes it difficult for individuals to determine which options are best suited to their needs. Young Canadians often don’t recognize or appreciate the benefits of saving early for their retirement. And many employees fail to use workplace pension plans offered by their employers.
“Without a concerted approach by government, pension providers, employers, unions, the financial advisor community and academic leaders to improve financial literacy across all age levels, it will be difficult to enhance coverage without mandatory measures,” says the report.
Roundtable and summit participants agreed that enhancing knowledge and understanding will help ensure Canadians are better positioned to take responsibility for their own retirement planning.
“Resolving Canada’s retirement income challenges will require calculated responses that will evolve during the years to come,” the report concludes. “Therefore, it is essential that stakeholders work together to identify options with the most broad-based support and begin developing them soon so they are in place when needed.”