Union leaders dismiss Alberta-B.C. pension proposal

In remarks aimed at western premiers and territorial leaders on the eve of their annual policy summit in Dawson City, Yukon, Alberta Federation of Labour (AFL) president Gil McGowan feels that the ABC plan—tabled in late 2008—ties returns to equity markets and offers no guarantees that pension coverage will increase, as the plan is voluntary and allows employers to opt out of coverage.

“As a result of the global recession and the collapse in equity markets, it has become painfully obvious that our existing patchwork system is not up to the task of providing adequate retirement income for most Canadians,” says McGowan. “But the answer isn’t to introduce a meagre supplemental program that employers can simply opt out of and which shifts all the risks onto the shoulders of individual Canadians. What we need is a cohesive system that makes a guarantee to Canadians that they won’t face the prospect of living in poverty in their old age.”

Bolstering the AFL’s argument is an analysis by Vancouver-based pension management firm PBI Actuarial. Its take is that the proposed ABC plan would generate as little as 14% of pre-retirement income for individuals enrolled in the plan—even when added to existing benefits provided by the CPP and OAS. This falls far short of the recommended threshold of 70%, says the firm.

Further criticism focuses on the opt-out offered to employers and the lack of mandatory contribution matching, but the main sticking point is the defined contribution structure of the plan, which PBI feels should be changed to defined benefit.

“The bottom line is, the ABC plan is, at best, an awkward band-aid solution,” says McGowan. “In fact, we’re concerned that the Alberta-B.C. proposal will distract from real reform and provide false hope to the growing number of Canadians who face the very real prospect of living in poverty after they retire.”

McGowan and other labour federations are renewing calls for a national pension summit where all stakeholders could debate fundamental pension reforms, such as expanding the CPP. McGowan has some influential thinkers in his corner, namely former president and CEO of the Ontario Teachers’ Pension Plan Claude Lamoureux and pension expert Keith Ambachtsheer, both of whom have been actively pushing for such a summit.

McGowan also warned against the “watering down” of employment insurance legislation, which was the subject of a recent agreement between Prime Minister Stephen Harper and federal Opposition Leader Michael Ignatieff.

“If the western premiers are really serious about helping their citizens weather this recession, they need to make sure that Harper and Ignatieff aren’t allowed to wiggle off the hook by stalling and offering half measures,” says McGowan. “An amazing consensus has emerged in Canada, calling for one national standard for eligibility and increased benefits for workers who lose their jobs. The western premiers should make it clear that they simply won’t settle for half a loaf.”

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