Fixing Our Pension Crisis:Toward retirement security for everyone

Michael J. Prince
Lansdowne Professor of Social Policy

 

Slide 1

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?

Slide 2

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

Slide 3

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:1. fully one-third of all Canadians had no retirement savings & 2.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

Slide 4

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

Slide 5

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)

Slide 6

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

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

Slide 7

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?