Fixing Our Pension Crisis: Toward retirement security for everyone

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Fixing Our Pension CrisisToward retirement
security for everyone

• Remarks for a Community Pension Forum
• May 19, 2010
• Michael J. Prince
• Lansdowne Professor of Social Policy

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What is the question?

• Are Canadians saving enough for retirement?
• What do people of different incomes and different
  age groups need to save to enjoy what most
  consider to be a comfortable retirement?
• What is the best way to enable Canadians to save,
  invest and prepare for retirement?

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Is there a crisis?

• Three basic viewpoints
• No real crisis the overall system is strong and
  elderly poverty rate is low, only minor
  refinements needed
• A temporary crisis due to economic and financial
  market downturns in 2008-09, and some
  under-saving
• A systemic crisis inadequate and declining
  private sector coverage, solvency problems of
  some benefit plans, longer life expectancies, and
  high debt loads among Canadian families

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What are Canadians doing?

• September 2009 TD Canada Trust survey found that
  80 of Canadians found saving money too hard
• November 2009 Royal Bank of Canada poll
  indicated
• fully one-third of all Canadians had no
  retirement savings
• Only about half of Canadians 55 years or older
  have made retirement plans
• April 2010 Investors Group survey found that 62
  of Canadians plan to carry debt such as mortgages
  into retirement years
• Delaying planned retirements and working longer
• Some recently retired returning to work

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Recent public policy actions

• Increased age limit for maturing RRSPs and
  pensions from age 69 to 71
• Increased pension surplus threshold for defined
  benefit Registered Pension Plans (RPPs) from 10
  to 25
• Pension income splitting for seniors
• Tax-Free Savings Account (TFSA)
• Registered Disability Savings Plan (RDSP)
• Modest changes to Canada Pension Plan

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Trends in private pensions

• Shift away from Defined Benefit (DB) plans
• Increase in Defined Contribution (DC) plans
• Growth in Group RRSPs
• Increase in Deferred Profit Sharing Plans (DPSP)

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Possible public solutions

• Public programs
• Increase GIS benefits
• Review OAS/GIS system
• Provincial elderly benefits
• Canada/Quebec Pension Plans
• Raise the benefit rate and/or the yearly maximum
  pensionable earnings
• Improve access to CPP Disability benefits
• A new national (or provincial or regional)
  supplementary pension plan
• Government-sponsored, automatic enrolment like a
  second tier to the C/QPP with a defined
  contribution and individual accounts, locked-in
  for retirement

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Possible private solutions

• Increase contribution limits on RRSPs and TFSA's
• Extend Pension Credit to apply to everyone
• Raise the age people must switch RPPs and RRSPs
  to Registered Retirement Income Funds (RRIFS)
  from 71 to 73
• Extend spousal income-splitting to RRSP holders
  as exists for RPP members
• Allow employers to deduct from payroll tax base
  their contributions to groups RRSPs
• Permit insurance companies and other providers to
  offer multi-employer pension plans
• Allow physicians to contribute to group pension
  plans

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Next steps

• What issues face you, your family, your
  neighbours, your co-workers in saving and
  planning for retirement?
• What do you think of the proposals being
  presented by various groups?
• What policy changes would like to see in order to
  move toward all Canadians having a secure
  retirement income?