Liberal leader Michael Ignatieff is backing the idea of a supplementary government pension plan, saying Canadians are not saving enough for retirement.
“We are calling on the government to make saving and full retirement easier and more secure for all Canadians,” Ignatieff told reporters in Ottawa on Tuesday, Dec. 8.
The proposed supplementary Canada pension plan would provide another option for retirement savings and increase the savings rate for Canadians.
“It allows [Canadians] to confront a challenge, many of us are unwilling to face that we just haven’t put enough away for a rainy day,” he said.
The proposed plan sounds similar to the Alberta/B.C. (ABC) plan, which is expected to be implemented in lieu of a workable federal solution.
An original aspect of the Liberal plan is to give pension plan beneficiaries the option to pool their plan with the Canadian Pension Plan in the event the plan sponsor goes bankrupt.
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“So when a company goes bankrupt and pensioners are needing help, they could elect to have the CPP step in and manage their pension fund assets for growth though a trusted vehicle like the CPP,” Ignatieff said.
The Liberals are also looking for changes to the Bankruptcy and Insolvency Act to protect pensioners when companies go bankrupt, particularly those on long-term disability. Such pensioners are currently at risk of losing all pension benefits in the event of a plan sponsor bankruptcy, and the Liberal’s plan would improve their status to preferred creditor.
The federal conservatives recently announced proposed reforms for federally regulated pension plans, which account for only 7% of Canada’s pension system. The proposals received mixed reviews, with many experts concluding that they amount to small improvements to a system facing systemic flaws and that a larger-scale approach is needed.
A November 2008 report by Alberta/British Columbia Joint Expert Panel on Pension Standards recommended the creation of the ABC Plan, available to all workers for which individual employers would not have any fiduciary responsibility. The plan envisions creating sufficient economies of scale to enable employees and employers to participate at low cost—as much as 50 basis points—in a defined contribution plan.
According to Alberta Finance Minister Iris Evans, the ABC template is also being considered by Saskatchewan, Ontario, New Brunswick and Nova Scotia, and that the pressure on the federal government to take action is increasing.
Federal and provincial finance ministers are meeting in Whitehorse on Dec. 17 and Dec.18 where pension reform is expected to figure prominently on the agenda.
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