There’s nothing like a good debate—especially when it concerns saving money.
Walrus magazine and the Healthcare of Ontario Pension Plan (HOOPP) co-presented a debate on just that at Hart House in Toronto yesterday. The motion? Be it resolved that Canadians are incapable of saving for their retirement needs alone.
Former Ontario MPP and host of Newstalk1010 John Tory moderated four well-versed industry speakers. Arguing “for” were Jim Keohane, president and CEO of HOOPP, and David Herle, principal partner with research firm The Gandalf Group. Arguing “against” were Jon Chevreau, editor of Moneysense, and Malcolm Hamilton, principal and worldwide partner with Mercer.
For
The “for camp” argued that even though having enough money in retirement is the No. 1 financial concern of those age 45-plus, most aren’t doing enough to prepare for retirement. Generally, 15% of a person’s income is the benchmark people have to put aside in order to make 50% of their income in retirement, said Herle—but “three-quarters of middle-income earners will miss that mark.”
Keohane pointed to unused RRSP contributions as evidence of individuals being unable or unwilling to save for retirement. Canadians have unused contribution limits of more than $600 billion, with the average RRSP having only $60,000 in it at retirement age. “Unless people are enrolled in forced savings plans, people simply don’t save,” he stressed.
Individuals, too, don’t have the training or temperament to negotiate the complex and volatile markets that we’ve experienced over the past 10 years, Keohane continued. “The only way to achieve an adequate retirement income is to start with a sufficient savings rate, then to earn a reasonable long-term return at a low cost.” But individuals haven’t been able to do this. DB plans, Keohane concluded, are the best retirement savings vehicle for most individuals.
Against
The “against” camp asked, if working Canadians really are incapable of saving for their retirement, how do we explain those already retired who, for the most part, are doing fine? For example, in 2009, the Organisation for Economic Co-operation and Development described Canada’s retirement system as “high-performing,” and concluded that “old-age poverty is comparatively rare.”
Chevreau argued that the working poor need to save little or nothing in order to preserve their standard of living in retirement, and for those earning minimum wage (about $20,000 per year), their after-tax income will increase when they retire, due to Old Age Security, GIS and the Canada Pension Plan—so they don’t really need to save.
Hamilton added to the argument that the strength of Canada’s retirement system is not based on Canadians’ frugality and financial literacy, but rather based on the design of the system itself. The Canadian system expects them to be financially illiterate, he said.
The proverbial retirement ball was batted around, with questions and comments ranging from Bismarck’s introduction of Germany’s first social security program in the 1880s to rethinking the word “retirement,” to questioning whether government plans will even exist for the next generation.
No surprise, there was no conclusive answer, and Shelley Ambrose, executive director of the Walrus Foundation, left it to the audience to make up their own minds.
What are your thoughts? Take our poll: Be it resolved that Canadians are incapable of saving for their retirement needs alone.
To see a video of the debate, visit hoopp.com/Learning-Resources/Symposiums/Pension-Debate/ and select “Complete: Debate on pensions” in the video player.