Ontario ready to consider mega-pension plan
TheStar.com – Business – Ontario ready to consider mega-pension plan
Published On Tue Dec 15 2009. By James Daw Personal Finance Columnist
Ontario is prepared to discuss every option to increase retirement income and broaden pension coverage, says Finance Minister Dwight Duncan – including an expansion of the Canada Pension Plan.
The minister was not prepared Monday to reveal which, if any, proposals he will champion at meetings with fellow finance ministers in Whitehorse this Thursday and Friday, however.
The ministers are to review research by Alberta economist Jack Mintz that was commissioned by Ottawa, as well as research done for Ontario by Bob Baldwin, a former researcher for the Canadian Labour Congress.
Discussion of their reports will set the stage for further study and public consultations leading up to Council of the Federation meetings with premiers next summer, Duncan suggested.
Fellow finance ministers from British Columbia and Alberta have been openly pressing for a national pension arrangement either linked to, or running parallel to, the CPP.
“Absolutely,” these ideas are worth studying, said Duncan.
But, so are tax changes to promote more individual savings, as well as improvements to Old Age Security.
“My hope and my view and my belief is that we can get to a point where we can agree on options … and a timeline for assessing them and moving to actually doing something about it,” he said.
“There will be controversial choices,” Duncan predicted.
“But that does not give us a reason for not proceeding. We need to continue to look at all of the options, recognizing that private savings do compose an important part of the post-retirement income system.”
Proposals for some form of mega-pension plan have raised the hackles of bankers and insurers.
Duncan acknowledged he has heard from the financial services sector, yet pointed out he has also heard from labour and seniors groups. He met recently in Toronto with finance ministers Colin Hansen of B.C. and Iris Evans of Alberta.
“This (lack of retirement income) may not be an immediate crisis that we’re facing in Canada, but it’s one that is coming at us,” Hansen told Heather Scoffield of The Canadian Press in an interview leading up to this week’s meetings.
Bill Kyle, senior vice-president of group retirement services at Great-West Life Assurance Co., issued a paper Monday defending single-employer, defined-contribution savings plans.
He predicted that any government-sponsored savings plan would run the risk of misleading savers into thinking they will be sheltered from investment losses.
Meanwhile, a start-up operation might not offer material cost savings compared with what his industry’s capital accumulation plan already offers, for as low as half a cent per year for every dollar invested in mega-sized plans to two cents per dollar in tiny plans.
Kyle assumed in his arguments that a national plan would try to replicate the complexity and requirement for individual advice that current private-sector plans typically have.
He makes no mention of the advantage of being able to move seamlessly from job to job and province to province while remaining in the same retirement savings plan.
Pat Kerwin of the Congress of Canadian Union Retirees of Canada said yesterday that a gradual increase in the percentage of income replaced by CPP pensions would not just help workers who are many years from retirement.
Having younger members of private pensions plans eventually collect more of their retirement income from CPP would help solidify the benefits from company plans for retirees.
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