The Canadian retirement system is unproductive and inefficient, but how do we tame this administrative beast without toppling the entire system? Taming it requires simplicity, efficiency and uniformity, not new schemes that add complexity and cost to employing workers.

To encourage savings, Canada linked retirement savings to the Income Tax Act, making it a tax-favoured activity. But we overly complicated the process by tacking on excessive minimum pension standards and complex, barely decipherable tax rules. And we weakened retirement savings by making it voluntary, imposing arbitrary contribution limits and delegating administration to often inexperienced and apathetic employers, trustees and union affiliates.

In 1987, when I first practiced law on Bay Street, the Ontario Pension Benefits Act contained 39 sections. A year later, post-reform, it grew to 116 sections, thereby increasing the cost of pension administration—enough to discourage even the most passionate employer. It’s no wonder the number of private sector DB plans has dropped precipitously since the late 1980s.

There are now 11 pension regulatory jurisdictions in Canada (12 if you include the Canada Revenue Agency), each with its own legislation and bureaucracy, regulating pensions for tens of millions. By contrast, the United States has a single act, the Employee Retirement Income Security Act, regulating hundreds of millions. And our income tax pension regulations are so complex that administrators must hire costly consultants to guide them through the maze of rules and regulations.

We’ve recently been introduced to tax-free savings accounts (still underutilized), pooled registered pension plans (the jury’s out), Canada Pension Plan (CPP) expansion (rejected by the feds), a possible Ontario pension plan (will this be similar to the little-known Saskatchewan Pension Plan?), Quebec’s longevity pension (innovative thinking, but another unwelcome payroll tax) and New Brunswick’s shared-risk pension model (too much risk, too little sharing). These ideas may have merit, but they also serve to demonstrate how splintered our retirement system has become, with each jurisdiction adopting its own go-it-alone solution to the perceived problem.

Rather than encouraging retirement savings, our entire savings infrastructure has had the opposite effect. Canadians aren’t saving enough, and employers are abandoning pension plans in frustration.

Imagine a Canadian retirement system featuring simplicity, efficiency, uniformity and all of the following:

  • a single (simplified) act regulating minimum pension standards for employers;
  • a single minimum standards regulator;
  • mandatory enrollment and employer participation;
  • seamless integration of personal retirement savings with CPP administration and investment management;
  • lifetime retirement savings limits for all citizens; and
  • longevity and inflation protection.

I will expand on these ideas in future posts, but consider for a moment what might be achieved if we simplified retirement savings and took most of the money spent on regulation, consultants and court proceedings and spent it on—wait for it—retirement savings.

Claude Marchessault is an educator, lawyer and the executive director of the British Columbia Teachers’, College and Public Service pension plans. The views expressed are those of the author and not necessarily those of the pension plans or Benefits Canada.
Copyright © 2018 Transcontinental Media G.P. Originally published on

Benefits Canada Newsletter

For the latest industry news and opinions, sign up for our daily newsletter.

See all comments Recent Comments

James Crouch:

sound s much like what the Uk started to implement back 13 years ago with stakeholder and are still tying to do today with Nest and auto enrollment… Careful you don’t take advisers out of process, you may have less people funding for retirement.. You view has a lot of merit but is a bit one sided.

Thursday, March 13 at 2:49 pm | Reply

Jim Cochrane:

I empathize with the objective of a singular retirement savings legislative process but we have been through this before. In the nineteen forties and fifties we had OAS at 70 and Government annuities. Then we had insurers authorized to issue annuities, Group Annuities and Top Hat Plan DPSP’s appeared shortly after, the latter to be outlawed and the former mostly replaced by investment only contracts. Term Certain Annuities for farmers and Celebrities and other high income short duration success stories. OAS at 65 then CPP In the mid 1960’s and later still GIS. Group RRSPs All of these linked to tax incentives and provincial labor interest legislation although Ontario was the main arbiter of most of these. These did create the need for this industry and this forum and launched the careers of independent Actuaries and Consultants.
One of the first major initiatives to harmonize legislation was initiated by CAPSA the Canadiann Assoc. of Pension Supervisory Authorities in the late 70s earl 80s at the time chaired by Manitoba ‘s John Corp FCIA . Chairman Manitoba Pension Commission.
This was all before your current practice began.

All of these initiatives resulted in upticks and down ticks to the Canadian Stock Market as there was little if any participation by the Retirement Savings outside Canadian markets.The majority of funds invested came directly from our retirement devices and had limits on withdrawls. What it did do was improve us to the enviable position of a world leader in low seniors poverty.
IMO Any significant change now will also be beneficial to those same markets which, in a totally unintended way, may have as big an effect on Canadian Markets as QE3 and the FED in the USA
As we have found out with 20/20 hindsight this solves the problems of most workers ……under 40 ….and those plans and or sponsors on shaky ground due to investment results and assumptions. It may prop up the pensions of the Boomer generation BUT like ERISA in the 1970s will create even more experts, increase administration and legal complexities and keep us gainfully and I might say lucratively employed a while longer. Winner by a TKO the Pension advisory industry and the Financial Markets and those who benefit from them.
Might explain why I read an article by someone who is representing seniors say that enhancing CPP and establishing a PRPP would assist the Poverty of current Canadian Seniors. Poverty among them has tripled since the early 1990s and made us among the worst of the developed world
Changes to Canada’s Pension Savings and Retirement system do not erase what came before
They just add another layer, which we hope we become an expert on before they change it again.
Lest I forget the major initiative is too ensure all Canadians including those who are not currently workers do not add to those 11% who are already senior and living in the misery of poverty. A one size fits all solution continues to elude us.

By the way in one of your articles I would suggest you visit many of the Seniors residences with any of the touring Choral groups who entertain them. You can see how they are herded and dumped so that the overworked staff can go back and attend to the other messes in the pens they call rooms. Most of these are women not surprising to us in this industry but many are former workers. I am sure you will appreciate the need to make this change as good as ERISA and Medicare are for seniors in the USA.

Friday, March 14 at 3:34 pm | Reply

Joe Nunes:


Monday, March 17 at 8:16 am | Reply

Barry Gros:

So practical and sensible!

Tuesday, March 18 at 9:01 am | Reply

Add a comment

Have your say on this topic! Comments that are thought to be disrespectful or offensive may be removed by our Benefits Canada admins. Thanks!

* These fields are required.
Field required
Field required
Field required