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Private sector pension plans could realize higher rates of return and produce lifetime income if they followed a model similar to their public sector counterparts, said Keith Ambachtsheer, executive in residence at the University of Toronto’s Rotman School of Management and a senior fellow at the National Institute on Ageing at Toronto Metropolitan University, during a panel discussion following the premier of the documentary Your Hundred Year Life.

The documentary widely addressed failings in private sector pension plans and how longevity can adversely impact retirement readiness. It also detailed how automatic enrolment and guaranteed lifetime income are critical to helping seniors achieve financial security in retirement.

Read: Sounding Board: Shifting from retirement planning to longevity planning

Of Canada’s $4.5 trillion pot of retirement savings, $4 trillion is generated through various employer-sponsored and individual retirement plans, with the remainder tied to the Canada Pension Plan and the Quebec Pension Plan, said Ambachtsheer.

He touted Canada’s public sector pension plans as the envy of the world, noting, unlike private sector plans, they benefit from high savings rates, good economies of scale and effective transfers of savings into wealth-producing capital — including on the private equity side — and they produce lifetime income.

“[These plans are] doing this for the participants [and have] a board that actually knows what they’re doing and can oversee the process. The other part is [they’re] really . . . creative in how [they] invest in financial markets so [they’re] not trading, [they’re] actually moving money into areas of the economy that’s needed and at the same time [generating] a significant rate of return.”

Indeed, with public sector plans, longevity risk is pooled in order to ensure plan members receive retirement income as long as they’re alive. By converting to a model similar to that of the public sector, the private sector would be able to create a larger savings pool to produce higher rates of return as well as lifetime income.

Read: Pension stakeholders call on feds to remove barriers to longevity risk pooling

“Easily, that would generate an extra $100 billion a year. One benchmark for that is the payout from the Canada Pension Plan Investment Board last year — $50 billion. We have the opportunity to generate twice what is paid out of the CPP/QPP, if we could wrap our head around making the private part of the system like the public part.”

While the issue of how private sector plans could transition to a public sector model is a much larger discussion, Ambachtsheer said it can and should be done to benefit Canadians, adding the commercial financial industry would have a role in transitioning roughly 13 million private sector pension plan members to a higher-quality retirement income system and could benefit as a productive provider in this new pension model.

“The good news is that we have some of these public sector providers of this package of retirement income services looking at how they could serve private sector workers as well.”

Read: Canadian DB pension plan solvency up in 2022 while assets lost 15.6%: report