Key inflection points in history are seldom appreciated for what they are until considerable time has passed. An extreme example is Zhou Enlai’s response when asked about the historical significance of the French Revolution two centuries earlier. He said it was too soon to tell.
The results of 60 Second Survey conducted recently by Morneau Shepell showed that a significant majority of plan sponsors polled agreed that Canada is suffering a retirement crisis. More interesting, though, are the views of the same sponsors on the one action governments can take that would be most effective in addressing this crisis.
It has become a truism that DC plans impose too much risk on employees but that belief is rarely quantified.
One of the enduring myths in the Canadian pension scene is that we have held onto our DB plans more tenaciously than the rest of the world. While many Canadian companies have indeed switched to DC, the impression remains that the trend is not as pronounced as it is in the U.S. or the U.K. […]
More than four years have passed since expert commissions in Ontario, Alberta, B.C. and Nova Scotia all endorsed target benefit plans (TBPs). TBPs are generally regarded as superior to DC arrangements since longevity risk is pooled and the intractable problem of educating a diverse population on myriad investment options is neatly circumvented by having one common fund. TBPs are also more suited to collective-bargaining situations since all members have the same investment return. Assuming that traditional DB pension plans are no longer viable in industries with volatile profitability—which means most industries—TBPs are the way to go.
My parents came from a small town in Italy near Monte Cassino. Apart from a famous battle there in World War II, the town is known for its monastery, which was established by St. Benedict in 529 AD, shortly after the continent had descended into the Dark Ages. For the better part of the next millennium when the “light of learning” was all but extinguished in Europe, there were only a few universities and monasteries—such as the one at Monte Cassino—where it continued to flicker.
Two rather contentious reports on public sector pensions were published recently—one by the Canadian Taxpayers Federation (CTF) and one by the Canadian Federation of Independent Business (CFIB) . While they obviously constitute an attack on public sector pensions, they also bring attention to an apparently untenable position held by the federal government.
It seems the idea of expanding the Canada Pension Plan doesn’t die easily. The NDP hasn’t let it go, nor has the Ontario government who, with their March 27 budget, reiterated their preference for a “modest, phased-in expansion of CPP” over pooled registered pension plans (PRPPs).
By 2029, Old Age Security (OAS) will not become payable until age 67. After nearly half a century of improvements in government retirement programs, this is the first significant take-away. And it may not be the last.
Back in December, the federal government eliminated the last vestiges of mandatory retirement in Canada. It did this by repealing the sections of the Canadian Human Rights Act and the Canada Labour Code that allowed employers to force their employees to retire at a certain age—that age being 65, in most cases.