The situation for Canada’s pension industry looked fairly uncertain at the beginning of 2016.
A significant portion of the industry was bracing for the implementation of the Ontario Retirement Pension Plan. The markets were also looking uncertain. The Toronto Stock Exchange’s key index had been trending downwards for the latter half of 2015 and hit worrisome lows in the middle of January 2016.
So it was by no means an easy year. Britain’s vote to leave the European Union further shocked the markets in June, and Donald Trump’s victory in the U.S. presidential election last month sparked even more uncertainty.
But perhaps surprisingly, the year turned out to be a decent one. When it comes to the markets, the stock index rose from its lows and has been relatively stable recently. And while the pension industry fretted over the potential disruptive impact of the ORPP, Canada’s finance ministers surprised many people in June when they reached an agreement to expand the Canada Pension Plan. The CPP plan, while more modest than the ORPP, put a stop to Ontario’s go-it-alone strategy and the costs and complications it would have involved.
Some people won’t like the CPP changes — and Canada’s small-business community has been particularly vocal in its opposition — but they’re a simpler and more straightforward way to boost Canadians’ retirement prospects. Ontario, in particular, was eager to push ahead with a plan to address the issue of retirement inadequacy on the basis of its belief that expecting people to save enough on their own wouldn’t work. And in an industry where the fragmentation of programs and regulations across federal and provincial jurisdictions is a major challenge, it’s good to see our governments choose a scenario that would avoid exacerbating the problem.
Things could have easily gone the other way. Several provinces had little interest in a plan that would increase the cost of doing business and boost payroll deductions. It would have been quite easy, then, for them to have held out on CPP reform. But with the ORPP having raised the level of concern about retirement adequacy, some financial incentives from the federal government and a fairly long period to phase in the changes, the provinces were able to reach a workable solution. There are, of course, many challenges that remain for Canada’s pension industry. As Benefits Canada’s Jennifer Paterson notes in our annual CAP suppliers report in this month’s issue, there are many regulatory issues to tackle, including outdated tax rules and the need for legal protections for the sponsors of capital accumulation plans.
Read: CAP Suppliers report
But while there’s more work to do — and the markets may decline once again — let’s enjoy the accomplishments of 2016 before hopefully moving more forcefully on other challenges next year. At the very least, the CPP deal shows governments are capable of making decisions with the long term in mind.
CORRECTION: A November 2016 article about dental fees in Alberta contained two errors. First, it referred to a Red Deer, Alta., dentist as Dr. Michael Suk. His last name is, in fact, Zuk. Also, it referenced Dr. Larry Stanleigh as saying dental hygienists in the province earn up to $35 per hour. According to Stanleigh, that number is out of date as hygienists now earn up to $60 per hour.
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