What specific types of oversight and control are needed?
KG: Rather than prejudging what we’d like to see [from the government], we’d like to see a coming together of the players in the industry to sit down with the federal and provincial regulators and talk about a better system of dealing with the management of pensions, the treatment of surpluses and the creation of adequate DB systems. We’ve had talks with all the major players in the pension industry, and they all agree there is a need for a rethinking of pensions and all sorts things like life expectancy and the tables that we calculate.
Can Canadians manage their own plans?
KG: I think most people don’t have the inclination or the skill sets to adequately manage their own pension plans. As a result of that we have a lot of DC plans that need to be managed by outsiders, by people other than themselves. Our research shows us that Canadian pension managers on private pension systems, DC plans, have the highest administration fees in the world. Our calculation suggests that over one’s lifetime, if [one has] a DC plan, about 50% of that plan will be chewed up in administration fees. That’s a lot of money.
What are your comments to those who say there are fees associated with DB plans as well?
KG: Yes, but you get the economies of scale. For example, the Canada Pension Plan. One of its key features is the benefit of its size, [which] means a lower administration cost. A lot of these DC plans are very small, and the costs associated with them are relatively high administration fees.
You feel that the CPP can be a model or expanded upon?
KG: Not to presuppose, and there are all sorts of options available, but one is to take the expertise and the management in the system and use it to expand opportunities for Canadians within the Canada Pension Plan system. It seems to me if portability is a key issue and private DB plans can’t offer that portability, the Canada Pension Plan can offer portability. And if it works that well, why can’t we look at making it a bigger part of retirement reality?
Do you think we will see a national regulator from the current government?
KG: If there is any hope at getting a single regulator of the pension system in Canada, you’d have to get a national securities regulator first. I’m not sure what the finance minister is thinking, but I know he has been talking about it. We have ministers dedicated to sport and we don’t have ministers dedicated to the issues of retirement security for Canadians, and I think it’s time.
Do you see an environment where both types of plans can work?
KG: The answer is yes, but we shouldn’t be resigning ourselves, as the minister has, that DB plans have run out their time. I prefer the comments from the Bank of Canada Governor who said he knows full well that DB plans are the best things for Canadians, but there are inherent problems with them that need to be addressed. I’d rather hear comment like that from the minister.
Joel Kranc is managing editor of BENEFITS CANADA. joel.kranc@rci.rogers.com
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