A Step Towards a National Supplementary Pension Plan?

“Over 75% of our private sector workers in B.C. currently aren’t covered by a group pension plan,” said B.C. Premier Gordon Campbell in a televised address in October. “We will spearhead a privately financed, defined contribution plan that creates a viable pension option for those who want to participate.”

The goal, according to Campbell, is to pool contributions and manage them under a single plan, thereby maximizing investment earnings, reducing administration costs and risk, and giving people new access to guaranteed pension entitlements.

While details are scarce, the announcement is in line with the findings of a recent interim position paper published by the Nova Scotia Pension Review Panel. The new defined contribution (DC) plan is expected to be available to employers, employees and self-employed people on a voluntary basis.

Observers say this type of plan is garnering more attention as the limitations of standard defined benefit (DB) and DC plans are becoming increasingly apparent due to demographic shifts and market forces.

“It’s not a massive surprise that this came up,” says Neil Lloyd, principal and intellectual capital leader for Mercer’s global defined contribution business in Vancouver. He explains that many countries looking at pension reform are viewing personal accounts as a popular solution, including the United Kingdom, United States, South Africa, and New Zealand.

Keith Ambachtsheer, director of Toronto’s Rotman International Centre for Pension Management, is pleased by the attention the B.C. plan is getting as it fuels a debate that for him is close to home. But he refuses to call it a DC plan.

“Call it a hybrid, but it’s not a DC plan,” he says. “It’s a plan that moves people through the early years in personal accounts, to getting a series of lifetime pension payments.” He claims that “old” terms such as DB and DC are unhelpful in moving the issue forward.

In May 2008, Ambachtsheer called for a national supplementary pension plan that would cover the 3.5 million workers who currently lack access to a pension, and he says that the expert panels of Nova Scotia, Alberta/B.C., and possibly Ontario will all vindicate his position.

“Where we’re going here is a very serious look at supplementary pension plans,” he explains. “What has yet to be resolved is whether we can create one national plan, or whether each province ends up creating their own. Either way, the issue is moving up the priority list of the major players, so momentum is building.”

To read the Nova Scotia Pension Review Panel’s Interim Position Paper, click here

To comment on this story, email jody.white@rci.rogers.com.