Canadians could have adequate savings during retirement if a government-backed supplementary pension plan were created, according to a study by the C.D. Howe Institute.

In the study, The Canada Supplementary Pension Plan (CSPP): Towards an Adequate, Affordable Pension for All Canadians, author Keith Ambachtsheer argues that the new pension model addresses two major shortcomings in workplace pension plans and individual retirement savings.

“First, an estimated 3.5 million Canadian workers are not members of a workplace pension plan, and are not accumulating sufficient retirement savings to maintain a decent post-work standard of living,” he says. “The second shortcoming relates to the 5.5 million Canadian households who currently have their retirement assets invested in retail products with high sales and management costs, which make it difficult for many of these 5.5 million households to generate adequate pension income at affordable retirement saving rates.”

Ambactsheer says there are three pillars in Canada’s retirement income system: the first is composed of Old Age Security and the Guaranteed Income Supplement; the second is the Canada/Quebec Pension Plans; and the third is composed of registered retirement savings plans (RRSPs) or company/union-sponsored defined benefit and defined contribution plans.

Although the proposed CSPP would be optional for both employers and workers, he believes the CSPP would very likely produce materially better pension outcomes for millions of Canadian households.

The creation and implementation of the CSPP cannot be left to private-choice market forces alone, as the barriers to success would be too formidable, says Ambachtsheer.

“Canada’s federal and provincial governments must create the legal and institutional structures required to make the CSPP element of pillar 3 pension reform as successful now as the Pillar 2 CPP/QPP reform process was 10 years ago,” he says. “They could leave Canadians no greater legacy.”

Ambachtsheer talked about supplementary pension plans during his testimony to the Ontario Expert Commission on Pensions. Click here to visit our special online OECP section..

To read the study on C.D. Howe’s website, click here.

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