As a massive wave of boomers surge towards retirement without any type of occupational pension to keep them in the style to which they have become accustomed, solutions are being sought to what is being termed a pending pension tsunami.
Much of the focus is on expanding the Canada Pension Plan; the country’s finance ministers have agreed in principle to bolster benefits, but have left the actual details to a later date.
Prince Edward Island finance minister Wes Sheridan’s plan to nearly double CPP benefits from about $12,000 to nearly $24,000 mirrors that being proposed by labour leaders, including Ken Georgetti of the Canadian Labour Congress and Paul Moist of the Canadian Union of Public Employees.
Others, including Mark Fuller, president and CEO of the Ontario Pension Board, maintain reintroducing pensions to the private sector, thereby recreating the traditional three-legged stool of retirement security – occupational pensions, personal savings, public programs – is a necessary process to building retirement income security.
Easing regulatory rules might convince companies to offer employees a pension plan, some experts suggest. And worker recruiting and retention benefits inherent to a company scheme could lead managers to introduce a plan for competitive reasons, but for Scott Doherty, western director of Unifor, Canada’s largest private sector union, the answer to getting pensions back into the private sector begins with a simple premise.
“The easy answer is to unionize people. Eighty per cent of the unionized people in the country belong to a pension plan. I would say that if we unionized more people … and brought in more collective agreements, pension plans would return to the private sector.”
Union representation in Canada stands at about 30 per cent of the workforce, with much of that focused in the public sector where pensions are part of a benefits package. Unions are active in defending employee benefits achieved through collective bargaining, including from a philosophical point of view, says Doherty.
“I think it is important that we have pension plans in general, and it’s important that plans are available in both the private and public sector.”
The majority of Unifor’s membership works in the private sector, but in a recent opinion piece published in the Edmonton Journal, Doherty took the Alberta government to task for saying it plans to unilaterally change the conditions of public sector pension provisions that were arrived at during collective bargaining.
He also wrote that the government is moving to a solution for a problem that doesn’t exist– in other words, there is no pension crisis in Alberta that necessitates drastic changes to the province’s pension plans, If revisions are required to keep plans sustainable, they can be made through negotiation, he suggests.
“If we are seeing some issues around a particular pension plan … then we should be given the right to try and (negotiate) the changes necessary to make sure those plans continue to exist.”
Alberta is not alone in seeing pressure on its public sector pension plans. In Ontario, for instance, PC Leader Tim Hudak espouses a defined contribution model for public sector plans, while some type of risk sharing scheme is being suggested in other parts of the country, including New Brunswick.
Such efforts are shortsighted, says Doherty, adding they ignore the strengths of a defined benefit plan, which include internal investment management, while private sector investors pay significant fees and face all the market risk. Traditional pensions, he adds, benefit the overall economy by ensuring that retirees, through a steady flow of predictable income, remain consumers and contributors to the economy.
“As we have more and more people (boomers) retiring … why would we not want that group to have money to put back into the economy, helping to create jobs? The shortsightedness of the changes to pension plans is alarming … they are clearly an economic driver.”
A number of studies are proving that very point, including a recent report from the Conference Board of Canada that found that British Columbia pensions plans help to bolster the province’s economy. And when considering the stage of retirement preparedness in this country, Doherty says those advocating the dismantling of defined benefit plans should stop to think about how much worse it will be if even more people lack adequate retirement income.
“Frankly, without pension plans those same people who say they are going to be on the hook for (them) will be on the hook anyways, because we are going to be in a situation where we will have people who can’t afford to retire, and can’t afford to live.”
Those people will turn to government programs like Old Age Security and the Guaranteed Income Supplement, putting pressure on taxes and other programs, experts like the CLC’s Georgetti maintain.
“If they do nothing (to improve retirement income security), the GIS costs in 25 years will go up to $32 billion a year,” he told ARIA in a recent interview.
Ensuring that citizens have adequate retirement income not only makes for good public policy and business sense, it goes to the heart of what it means to be Canadian, say Doherty.
“We need to be upfront about the fact it’s ok to have a pension plan … I don’t think it’s right for the elderly to be at or below poverty levels because they can’t afford to retire. That’s not what Canada stands for.”