When I came back to work last August after my second maternity leave, it was with a renewed sense of eagerness and anticipation. What new developments had occurred during my absence? How had pension reform progressed? What had changed over the course of the year?
But when I started talking to key industry stakeholders, the answer was disappointing. Not much.
We know that DB plans suffered significantly during the financial crisis, which has made many employers rethink the risk/reward trade-off of offering them. New DB plans are indeed rare gems in the Canadian pension landscape. Whether due to inadequate contributions, poor employee decision-making or a low-return environment—or all of these factors—DC plans aren’t accruing the hoped-for balances. And let’s face it: most people just aren’t very good at saving on their own, particularly for a long-term prospect like retirement.
Regardless of whether or not Canada is facing a pension crisis, it’s clear that retirement income adequacy is going to be a problem moving forward. But whose problem is it?
Employees are looking to their employers to help them save for retirement. But, faced with increasing costs and potential liabilities, most employers would prefer that employees assume the brunt of this responsibility. Since the Canada Pension Plan (CPP) is part of the “three-legged stool” of retirement savings, government clearly has a role to play. Yet the finance ministers couldn’t come to a consensus on expanding the CPP at their December 2013 meeting—and they’ve also been lacklustre in their support of pooled registered pension plans—so it seems the government would prefer to shift that responsibility right back to employers or individuals. We’re stuck in a vicious circle.
Currently at its centre—and a subject of heated debate in 2013—is the proposed CPP expansion. Those in favour argue that it’s the best way to truly expand the reach of pension coverage in Canada and help to ensure adequate retirement income for everyone. Those opposed believe that the additional contributions will be difficult for smaller employers and that it’s unfair to future generations of Canadian workers. Still others believe it’s the right solution, but just not the right timing.
The real problem, though, is that the time for talking is past. It’s time for action—meaningful change—to move the pension agenda forward.
Whose problem is the pension problem? It’s everyone’s. But if no one’s willing to take the lead, we’ll end up right back where we started. Again.
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