Ministers fall short on pension reform

TheStar.com – Opinion/Editorial – Ministers fall short on pension reform
Published On Sun Dec 27 2009

Now here’s some hopeful news from the Far North you may have missed: no need to worry about your retirement income. There is no pension crisis. Trust us, all is well.

No, these cheery declarations did not emanate from an optimistic Santa Claus setting off from the North Pole. The collective serenity came from Canada’s finance ministers meeting in Whitehorse just ahead of the Christmas season, where they passed judgment on one of the biggest issues to emerge from the Great Recession of the past year: pension security – and insecurity.

“It’s certainly not a system in crisis,” declared Ontario Finance Minister Dwight Duncan.

“The first thing we have to make sure is we do no harm,” chimed in his federal counterpart, Jim Flaherty. “What precisely, surgically, would be useful for Canadians’ retirement incomes later on?”

Such tepid declarations are hardly clarion calls to action on an issue that has become uppermost in the minds of many working Canadians who have seen their retirement savings become increasingly vulnerable. Pensions have long been a sleeper issue, but every so often a perfect storm arises that brings the issue to the top of the political agenda. Dramatic drops in market valuations, corporate bankruptcies and rapidly declining coverage from private pension plans have combined to undermine the public’s faith in their retirement options.

The missing ingredient is political will. Rather than seize the initiative at their Yukon meeting, federal and provincial finance ministers agreed only to meet again on the issue in May, five months hence. There was no commitment to a national summit on pensions, which some provinces had been pushing prior to the Yukon meeting.

The ministers may have been overly influenced by a report produced for them by economist Jack Mintz, who said the system is “performing well.” Mintz argues that RRSPs – widely discredited for their relatively low take-up – can be superior to private pensions because of their liquidity. Such an analysis is music to the ears of the financial sector, which is resisting any major expansion of government pensions.

With fewer than one in four Canadians now holding a private company pension plan, and the trend lines pointing to a further decline, pressure is building for political leadership to expand on the existing Canada Pension Plan. A good first step would be to start laying the groundwork for a national pension summit involving the key players.

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