For several years now, there has been an ongoing debate in Canada on how to deal with our two-headed pension “crisis” – the potential and actual loss of pensions and retirement savings as the result of weak markets and low interest rates – and the fact that a large (and growing) number of Canadians face a serious drop in their standard of living in retirement. The second issue can only effectively be dealt with through improvements to the public pension system – particularly Guaranteed Income Supplement (GIS) and Canada/Quebec Pension Plan (C/QPP) benefits, as proposed by the Canadian Labour Congress.
After a seemingly endless round of studies, reports conferences and consultations, we’re getting close to the end of this round of pension reform.
First, the bad news.
Though most Canadian jurisdictions are making significant changes to the rules governing the funding of workplace pensions, governments are not moving on changes to bankruptcy legislation or a national pension insurance scheme that would offer pension plan members a higher level of protection for their earned benefits. Even in Ontario, which currently has the only guarantee fund in the country, the McGuinty government has refused to upgrade the coverage level, as recommended by its own expert pension commission.
On the question of improvements to the public pension system, the answer is still up in the air. While the federal government has given no indication that it is ready to improve the GIS to at least bring all seniors up to the poverty line, we are as close to C/QPP improvements as we have been in almost three decades.
At the June meeting of federal and provincial finance ministers, there was a rough consensus on unspecified “modest” improvements to C/QPP retirement benefits, subject to further discussions and agreement between governments. Changes to the Canada Pension Plan require agreement by the federal government and two thirds of the provinces representing two thirds of Canada’s population.
By the time the ministers meet again this December, there is likely to be some kind of agreement on the nature of the modest improvement. The Canadian Labour Congress proposal is for a gradual doubling of the retirement benefit, fully paid for by a contribution increase (much less than a doubling) introduced over a seven-year period.
The insurance industry is pushing its own scheme to require all employers to provide access to a voluntary defined contribution plan (run by the insurance industry). This would not deal with basic coverage problem, but would provide a huge windfall for the already bloated insurance industry.
There is a strong possibility for real positive change in the next few months, but it will depend on continuous pressure of federal and provincial governments. The inter-government discussions are taking place between bureaucrats out of the public eye. We need to work with the CLC and many other groups to ensure that we get the strong public option and not some half-baked scheme that benefits only the insurance industry.
