Federal parties square off on pension reform
TheGlobeandMail.com – Federal parties square off on pension reform: Liberals vow they would take a more activist role and expand CPP, Tories warn of spiralling costs
Published on Monday, Oct. 26, 2009. Last updated on Tuesday, Oct. 27, 2009. Steven Chase, Ottawa
Federal political parties are scrambling to stake out turf in the debate over the retirement savings crisis, with the opposition Liberals vowing they’d take a more activist role than the Harper government and Conservatives warning against costly new schemes.
Liberal Leader Michael Ignatieff, his party lagging in the polls behind the Tories, held a roundtable Monday on the country’s crumbling private pension system. He suggested he’d expand the Canada Pension Plan, a vehicle that’s financed from the pockets of employers and workers.
“That basic commitment that Canadians make to each other about a secure and dignified retirement is now in some question,” Mr. Ignatieff told the Ottawa forum.
“There is a widespread feeling … of insecurity.”
Canada is facing a massive deficit in retirement savings that is the legacy of under-funded pensions, corporate bankruptcies and stock market turmoil. And while most public-sector employees have the security of taxpayer-backed pensions, about 11 million workers in the private sector, or about 60 per cent of the adult work force, have none.
Many existing private pension plans are facing shortfalls as companies go bankrupt or fall on hard times. The combined deficit is estimated at about $50-billion today.
Ottawa and the provinces face mounting pressure to act.
In the short term, the Harper government plans legislation, nine months in the making, to help federally regulated companies better cope with their private pension plans. The Tories are also weighing new tax rules to let companies run bigger surpluses in pension funds, a measure industry experts say could have prevented today’s yawning deficits – but one that won’t yield a quick fix.
But Ottawa and the provinces also face calls to intervene far more broadly in Canadians’ retirement savings behaviour, such as enacting new compulsory or voluntary schemes that would steer people toward building bigger nest eggs.
The NDP, which is propping up the minority Harper government, last week proposed that Canadians be forced to buy pension insurance as part of a package of suggested reforms to tackle the problem.
The Tories are proceeding cautiously on the bigger question of inadequate savings, wary of committing Ottawa to any new programs. In May, Federal Finance Minister Jim Flaherty agreed to study retirement security with the provinces, and reports on this are due before mid-December, when he and his counterparts meet in Whitehorse.
On Monday Mr. Flaherty accused the Liberals of jumping on the bandwagon late and offering what he called a “knee-jerk reaction to a serious issue.”
Ted Menzies, Parliamentary secretary to Mr. Flaherty, and Ottawa’s point man on pensions, said he doesn’t want to prejudge whether the federal government sees a leadership role for itself on the security issue.
He warned against new programs that would saddle taxpayers with big obligations, saying some countries now find themselves unable to afford more elaborate schemes.
“They put in place a system of paying [for] all retirees, but they never put in a system that was adequately set up to pay for it. So they’re in a huge deficiency right now.”
The Liberals are still drafting their pension platform, but Mr. Ignatieff floated the idea of supplementary savings schemes tied to the Canada Pension Plan, or giving the plan’s managers additional responsibility for “retirement security.”
Mr. Menzies said a research working group assembled by Ottawa and the provinces in May is studying how the adequacy of retirement income in Canada compares to other countries, among other things.
A key question Mr. Flaherty and his provincial counterparts will face is whether efforts to boost savings will be compulsory or voluntary. Critics of voluntary incentives – such as registered retirements savings plans – say these have failed to generate sufficiently large nest eggs for Canadians.
Liberal finance critic John McCallum said his party will provide its own proposals within a month or so, and these could include expanding the Canada Pension Plan, more tax incentives for savings, and prioritizing pensions in the event of corporate bankruptcy.
“We believe in a major role for the federal government in this area,” he said.
Mr. McCallum said his party hasn’t yet decided on the right balance of compulsory or voluntary solutions to the problem. Mr. Menzies said this is a question that one that legislators will have to decide.
“That will be the one that’s debated on the floors of the legislatures as well as on the floor of the House of Commons,” the Tory MP said.
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