The House of Commons recently passed Bill C-518, which would revoke the pensions of politicians who are convicted of certain serious crimes. The bill would apply to situations where an MP or senator is convicted of an indictable offence with a minimum prison sentence of two years, such as bribery or fraud. The elected official would get to keep his or her own contributions and interest earned on those contributions, but government contributions would be rescinded.
My initial reaction? Well, of course. Why should a convicted criminal be guaranteed a secure and comfortable retirement when so many honest, hardworking people have to scrimp and save, work longer or retire with a lower standard of living?
But the more I thought about it, the more I realized this is actually just a small piece of a larger issue: retirement income security and the ever-growing gap between the haves and the have-nots in Canadian society.
Public sector pensions—and the associated costs—have begun to come under fire as the general public questions why some get “gold-plated” pensions while others struggle with insufficient retirement savings. And many Canadians have no pension plan at all: Statistics Canada reports there were 18,236 registered pension plans in 2013, a decline from 19,179 in 2009.
Private sector employers with DB plans face difficult choices about the sustainability of these plans going forward. Many will conclude the costs and risks are just too great. Yet DC plans often suffer from low contributions and may not generate adequate returns, since most members aren’t educated or equipped to make good investment decisions. Target benefit plans offer some promise (see “Are target benefit plans secure?“), but significant legislative change has to happen for them to become widespread.
Retirement income adequacy is becoming a real concern. For many years, public sector plans were exempt from these discussions. Not anymore.
Is it right to scale back public sector pensions? Is it fair to hold employers responsible for the financial well-being of their employees? To what extent can people depend on government benefits to fund their retirements? Given increased life expectancy and general lack of investment knowledge, is it reasonable to expect employees to save enough on their own?
Now is the time to sit down and talk about these questions, or this issue’s going to explode. And everyone—public and private plans, employers and policy-makers, plan members and retirees—needs a seat at the table.
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