7. Retirement Security We Can Count On / Une sécurité de retraite sur laquelle nous pouvons compter

(Policy papers 2012-2013)

Canadians are fully aware our society is aging, and we know a great many of us haven’t saved enough for those long golden years. A weak economy has caused frightening collapses of some private pension funds, and younger Canadians are questioning whether the public system they are contributing to today will be there for them in future decades. Instead of unilateral government pronouncements, it’s time for sensible public discussion about how to build a retirement and disability security system that is fair and sustainable.

Les Canadiens sont bien conscients que notre société vieillit, et nous savons que bon nombre d’entre nous n’a pas suffisamment mis de côté pour son âge d’or. Une économie faible a créé l’effondrement de certaines caisses de retraite privées, et les Canadiens les plus jeunes se demandent si le système public auquel ils ont cotisé jusqu’à aujourd’hui sera toujours là pour eux dans les décennies à venir. Au lieu de faire des annonces gouvernementales unilatérales, il est temps d’engager une discussion publique raisonnable pour réfléchir à comment bâtir un système de sécurité de retraite et d’invalidité qui sera juste et durable.


Retirement security has been on the public agenda for some time, but political leadership has been lacking. Governments that want to build strong support for reforms must inspire younger Canadians in particular to believe that their proposals are genuinely intended to benefit all Canadians and designed with a view to the long term and across generations. The federal government and indeed all federal politicians has actually weakened their moral authority to legislate in this area by failing to take long-overdue steps to end the absurdly rich pensions for MPs, an unacceptable public liability for which all Canadians pay, until October 2012.

At the same time, the government’s proposals were introduced in an unnecessarily adversarial environment, inviting resistance instead of collaboration. Raising the age of eligibility for Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) from 65 to 67 is a step in the right direction, but the government failed to address the real issue: how to get public money to those who need it most. It is entirely sensible to acknowledge that most Canadians can work past 65, and many do, but it is imperative to ensure adequate assistance for those lower-income Canadians who cannot do so and need assistance to stay out of poverty. The government has dispensed with public or federal-provincial consultations that could come up with ways to ensure that any changes to pensions do not simply transfer people to the provincial welfare rolls. In addition, discussions must address the greater impact of the changes on women, immigrants, and persons with disabilities.

Despite the best intentions of the government that introduced Registered Retirement Savings Plans, most Canadians do not save enough for retirement. The Canada Pension Plan/Quebec Pension Plan is therefore a critical component of all Canadians’ retirement plans, together with OAS and the GIS, which have done much to keep many elderly Canadians out of poverty.

This government’s preferred tool to encourage greater pension saving is Pooled Retirement Pension Plans (PRPPs), which would help smaller companies to provide pensions by permitting multiple employers to jointly sponsor pension plans; self-employed workers could also join them. But implementation will require provincial leadership and coordination, which is unlikely to happen soon. The PRPPs are also voluntary and are unlikely to be cost-effective. Quebec’s similar VRSPs, introduced in March 2012, automatically enroll employees after one year of service but they can choose to opt out within 60 days of being enrolled.

So to make a substantial difference to Canadians who are facing financial uncertainty, it would be far more valuable for the federal government to take the lead in building a consensus to amend and expand the CPP/QPP, still the largest and most efficient pension arrangement in the country. It already covers all Canadians, including the self-employed and workers without a workplace plan. Canadians could be offered a publicly run alternative to private investment funds by allowing them to make additional voluntary contributions to their individual CPP/QPP pension accounts, which are managed on their behalf by the respected arm’s-length CPP Investment Board. This would ensure lower management fees and higher rates of return.

Private pension plans can and do collapse for many reasons. The company may run into trouble, or the pension plan may invest badly or lose value because of the vagaries of the stock market. Of course companies will take steps to cover shortfalls if possible, and both the federal and provincial governments have eased regulations to give struggling companies more time to do so. A company that goes bankrupt, however, is usually relieved of its pension funding obligations, leaving its retirees out in the cold. The federal government should take immediate steps to ensure pensioners are well protected in the event of a company’s bankruptcy. Nortel pensioners learned the hard way that what you receive depends on which province you live in.

As we look at pensions and retirement security, we should also review the safety net for people with disabilities in Canada. Those who are most in need must have adequate income support. Instead of a system we have a patchwork quilt of seven different disability-related programs: Canada Pension Plan disability benefits, employment insurance sickness benefit, veterans’ disability pensions and awards, workers’ compensation, the disability component of social assistance, disability tax credits, and the Registered Disability Savings Plan. Some private disability insurance is also available. Streamlining this miscellany could take some time but would result in better participation of disabled persons in the workforce and greater equity in the amount and duration of income security benefits. The current mishmash is to blame for, among other things, the outrageous situation of veterans spending five years in the courts to finally convince Ottawa not to reduce their long-term disability benefits by the amount of their Veterans Affairs disability pension.