Frontlines

More calls for universal pharmacare

With the current Canada Health Accord set to expire in 2014, more voices are calling for a universal public drug program, arguing that it would bring down growing drug costs and increase access to medication.

The Canadian Federation of Nurses Unions (CFNU) is the latest group to urge premiers to work with Ottawa to create a universal pharmacare plan with a national drug formulary.

Although the premiers agreed to establish such a program in 2004, no steps have yet been taken. “Ten years later, we haven’t made much progress,” says Linda Silas, CFNU president. “Yes, we are doing bulk buying for an X number of drugs,” but that still doesn’t fully address the fact that one in 10 Canadians currently cannot afford to fill a prescription, she explains.

“We believe your prescription medications are all part of your treatment and all part of you being healthier,” Silas says, noting that it makes no sense to exclude drugs from a universal healthcare plan.

A universal drug insurance plan would be beneficial for employers, too, given that a major issue they’re facing is the rising cost of drug plans, she adds. Canada is the only country in the Organisation for Economic Co-operation and Development that offers universal public healthcare without a pharmacare plan. Many in the academic community also see universal pharmacare as a solution to the current system. “When it comes to prescription drugs, Canada’s current system is plagued by massive waste, massive costs and plenty of people unable to afford their drugs,” Marc-André Gagnon, an assistant professor with the School of Public Policy & Administration at Carleton University, wrote in a recent National Post column.

“Universal pharmacare does not mean an ‘open bar’ for everybody; it means leveraging buying power and using market forces in order to contain drug costs, achieve sustainability and improve the health outcomes of the population.” Canada’s life and health insurance companies are yet another entity that agrees that the current regime needs to be replaced by a government-run universal plan.

But pharmacare has its critics, too. They argue that it won’t improve access to medication for all Canadians. Rather, they say, the disappearance of private insurance plans would limit patients’ choices because public plans cover fewer new drugs approved by Health Canada than private plans do.

CPP reform requires bold action

As the country considers a slight expansion of the Canada and Quebec Pension Plans (C/QPP), a recent report calls for bolder measures such as delaying the eligibility age for public pension benefits in exchange for phasing them in sooner.

Current proposals—which assume that any future benefit enhancement must be fully funded and phased in over a nearly 50-year period—will not address the projected retirement income gaps, according to a study by the Institute for Research on Public Policy, Not- So-Modest Options for Expanding the CPP/QPP.

“For the bulk of baby boomers about to retire, these reforms either will be phased in too slowly to make a difference or they rely too heavily on ineffective voluntary savings plans,” the report says, calling for a bolder solution that challenges conventional wisdom about pension reform.

“Most critical is the premise, underlying nearly every proposal to date, that future enhancements to the C/QPP must be fully funded,” argues Michael Wolfson, author of the report and former assistant chief statistician with Statistics Canada. “This requirement means new benefits can be drawn only as they are built up over time, thus extending the period for full implementation over nearly a half century.”

Instead, he calls for removing this condition while raising the eligibility age for enhanced benefits to between 68 and 70 so that these benefits can be phased in sooner, over 20 years.

This kind of reform would help Canada to maintain a solvent pension fund with stable contribution rates over the long run and adjust benefits to compensate for shorter-thanaverage life expectancy among lower-income individuals, Wolfson argues.

Senior fraudulently collects CPP and OAS for years

A retired resident of Leamington, Ont., recently pleaded guilty to collecting Canada Pension Plan and old age security (OAS) benefits for over 14 years.

The 78-year-old woman was claiming the funds on behalf of her husband, even though he had passed away in the late 1990s, according to the RCMP.

The woman, identified by The Windsor Star as Eveline Rice, must now pay restitution of more than $150,000 to the Receiver General of Canada. She also received a 12-month conditional sentence order and 12-month probation.

Initially, she was charged with three counts of fraud over $5,000 and three counts of uttering forged documents. Rice pleaded guilty to just one count of fraud; the other five charges were withdrawn. She had been the subject of a two-year investigation by the RCMP.

“The Canadian public contributes to these government programs and trusts that they will be there in their retirement years,” says Inspector Serge Cote, officer in charge of the Windsor RCMP detachment, explaining that fraudulent activity hurts all taxpayers.

CPPIB expands presence in Brazil and China

The CPP Investment Board (CPPIB) recently signed a deal to buy interest in one of Brazil’s major shopping centre companies and raised its equity allocation to China. The CPPIB is acquiring a 27.6% interest in Aliansce Shopping Centers S.A., a shopping centre company in Brazil, for $492.5 million.

Aliansce owns, manages and develops enclosed shopping centres throughout Brazil. Based in Rio de Janeiro, the company has a portfolio of 17 stabilized assets and two development projects. Before agreeing to buy an interest in Aliansce from General Growth Properties, the CPPIB’s real estate portfolio in Brazil amounted to more than $900 million. That portfolio includes interests in retail, office and logistics properties, with a total area of more than 35 million square feet, including development assets.

Recently, the CPPIB also increased its presence in another emerging market: China. It boosted its equity allocation to Goodman China Logistics Holding (GCLH) by $416.6 million. The CPPIB’s partner, Australian-based Goodman Group, has increased its investment by about $100 million. With this latest announcement, the partners have now allocated more than $1.5 billion to the joint venture.

“The fundamentals of the Chinese logistics sector remain compelling, with a visible pipeline for future projects fuelled by the demand for modern and efficient logistics facilities, rising domestic consumption and the growth of the Chinese e-commerce market,” says Graeme Eadie, senior vicepresident and head of real estate investments.

GCLH was formed in 2009 to invest in logistics properties in locations across mainland China.

Pension plans see flat returns in Q2

Canadian DB pension assets remained unchanged during the second quarter of 2013, as a June spike in interest rates erased advances in April and May.

A survey from RBC Investor & Treasury Services shows that DB pensions returned 0% for the quarter ending June 30, keeping year-to-date results at 4.5%.

“Market volatility returned in June, following the Fed’s statements regarding its commitment to quantitative easing,” says Scott MacDonald, the company’s head of pension segment development. “While all DB plans benefit from rising long-term bond yields as pension liabilities are reduced, those with risk mitigating liability-driven investment strategies were the hardest hit during the quarter.” Bonds had their largest three-month decline since 1994, losing 2.5% in the quarter and 1.7% over six months.

The worst-performing asset class in Q2 was Canadian equities, with the S&P/TSX Composite Index falling by 5.7% and wiping out its first quarter gain of 4.4%.

Pensions’ foreign equity investments underperformed the MSCI World Index (CAD) by 0.4%, reversing a trend of positive returns for the past two quarters. The MSCI World Index fell 3.2% in Canadian dollars compared with 4.3% in local currency.

“The weakening of the Canadian dollar lessened the impact of falling foreign equities on Canadian DB plans, but the continuing downward pressure on stock prices is eroding the gains of plans seeking higher returns from equities,” MacDonald explains.

American workers embrace voluntary benefits

The overwhelming majority of employees in the United States think that voluntary work benefits help them simplify and secure their increasingly complex and unpredictable lives, according to a recent survey.

As many as 90% of Americans see voluntary benefits as a good way for companies to balance the needs of their staff members with shrinking budgets, according to a survey by WellPoint, one of the largest health benefits companies in the U.S.

Employees choose to buy voluntary benefits—typically through payroll deductions—mainly in order to save money and to protect themselves and their families, according to the study.

While Americans favour voluntary benefits, only half of the employees surveyed by WellPoint in 2010 and 2012 report being knowledgeable about them. The reason is that employees spend little time on their own learning about benefits options: only 8% of workers say they dedicate five hours or more to research before deciding on their enrollment benefits, according to the study. Nearly half of employees say they spend less than an hour, and about one-quarter allocate less than half an hour.

The survey polled 2,500 Americans over the age of 18.

Lives get longer, but retirement savings fall short

As longevity increases and employer-sponsored pension plans become scarcer, many Canadians harbour a false sense of security that they are prepared for a long retirement—when, in fact, they’re not—and few know how much money they will need to save.

Sixty-two percent of non-retired respondents are generally confident that they have planned well for retirement, according to a BlackRock Canada survey. But only 59% actually have a financial plan. And fewer than half of Canadians who have saved less than $100,000 for retirement have a plan—although, arguably, they are the group that needs a plan most.

Only 15% of future retirees are very informed about how much they will need to save annually to meet their retirement goals.

The study also shows that 18% of Canadians don’t put any retirement money aside on a monthly basis, and 11% don’t know what they save. The biggest barriers to saving more are living paycheque to paycheque, decreases in income and the cost of education, according to the survey.

These alarming numbers coincide with a decline in workplace pension plans. Nearly two in five future retirees have no access to a company plan, including one-quarter of currently employed investors. At the same time, Canadians are living longer than ever.

One thing that employers can do to help their staff prepare better for longer golden years is to make enrollment in their pension plans mandatory, says Noel Archard, head of BlackRock Canada.

Along with the government and the financial industry, employers can also provide more financial education, he adds.

Events

2013 Mental Health Summit: November 15, 2013 at the Fairmont Royal York, Toronto

Today’s employers understand the importance of their staff’s mental health and its impact on productivity. But they often don’t have the tools to move from simple awareness to the application of an effective mental health strategy.

The 2013 Mental Health Summit will discuss ways to get mental health on your organization’s agenda and successfully implement a plan around it. Sessions will be dedicated to subjects such as depression, addiction and ADHD.

Speakers include Karen Seward, president of Cira Medical Services, and Louise Chénier, research associate with The Conference Board of Canada and network manager for the Council on Workplace Health and Wellness.

This month in numbers

18% of Canadians don’t put any retirement money aside on a monthly basis—mainly because they’re living paycheque to paycheque — BlackRock Canada survey

19% of global pension fund assets are currently invested in alternatives, compared with 5% in 1997 — Towers Watson Global Alternatives Survey

45% of Canadian institutional funds expect to increase allocations to exchange-traded funds by 2014 — 2013 Greenwich Associates study

56% of Canadian investors know their investment profile, which identifies their risk tolerance and financial goals — 2013 BMO Nesbitt Burns Savviest Investor Index

$513,600,000: the amount of equity funding that the Ontario Teachers’ Pension Plan will provide to the Hudson’s Bay Company to support the retailer’s planned acquisition of Saks

Market Watch

RBC Insurance and Manulife Financial now offer new products intended to help Canada’s smaller employers provide health benefits. RBC Insurance is offering a full range of group health and dental benefits to small and medium-size businesses with as few as two employees. The new Group Benefit Solutions program is supported by an online portal for plan administrators and employees. The Manulife product, called LaunchPlan, targets Canada’s smallest business owners—those with two to nine employees.

Buck Consultants, a Xerox Company, has launched Buck on the go, a new iPad app that offers access to thought leadership materials on its website, such as articles and white papers. Available in the iTunes App Store, app users can email and share pages on social media.

Fiera Properties recently launched the largest open-ended Canadian property fund in more than 20 years. The purpose of the long-term diversified fund is to provide pension funds, foundations, endowments and private investors with an open investment fund design. The Fiera Properties CORE Fund represents $352 million in equity capital from investors, says Stuart Lazier, CEO of Fiera Properties.

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