As Ontario pushes ahead with pension reform to improve retirement security for its citizens, a C.D. Howe institute report says it should consider a “middle-way” solution between current competing visions for reform.
In Helping Ontarians Save for Retirement: How the Province Could Adapt the Canada Supplementary Pension Plan, author Keith Ambachtsheer recommends an approach that avoids the potential pitfalls of two existing options: an expanded Canada Pension Plan or reliance on pooled registered pension plans.
General agreement has emerged that Canada has a pension coverage problem, notes the author. Many middle-income workers without a workplace pension plan are likely to face sharp reductions in their standard of living when they retire.
Faced by a lack of federal-provincial consensus on how to solve the problem, the Ontario government has announced its intention to develop a made-in-Ontario solution to enhance the retirement income security of its citizens. Other provinces, including Prince Edward Island and Manitoba, have expressed willingness to take part in the discussions.
The report recommends Ontario take a middle way: the Ontario Supplementary Pension Plan (OSPP), based on the author’s 2008 proposal for a Canada Supplementary Pension Plan.
Ambachtsheer’s proposed OSSP would combine the best elements of traditional DC and DB plans. For example, a target pension, clear property rights, no intergenerational wealth shifting, lifetime income and an opt-out option. The author cites the United Kingdom’s National Employment Savings Trust as a successful model of the “middle way.”
For Ontario to adopt this model, several challenges to design and implementation would lie ahead, he says:
- Is the province prepared to require employers not already offering a qualifying pension arrangement to enroll their employees in a qualifying arrangement, as Quebec has already done?
- Is the province prepared to appoint an expert task force charged with designing and creating a new arms-length pension agency that would finalize the design of, and administer an OSPP?
- Will it find an acceptable way for commercial vendors to participate in this newly created market for pension services?
If the answer to these questions is yes, says Ambachtsheer, there are three keys to success the province should keep in mind: first, a viable, explainable vision to address the pension coverage problem; second, the political will to see it through; and third, a properly resourced, effectively led effort to implement it.
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