11

Fixing Our Pension Fixing Our Pension Crisis:Crisis:Toward retirement Toward retirement security for everyonesecurity for everyoneRemarks for a Community Pension ForumRemarks for a Community Pension ForumMay 19, 2010May 19, 2010

Michael J. PrinceMichael J. PrinceLansdowne Professor of Social PolicyLansdowne Professor of Social Policy

22

What is the question?What is the question?

Are Canadians saving enough for Are Canadians saving enough for retirement?retirement?

What do people of different incomes What do people of different incomes and different age groups need to and different age groups need to save to enjoy what most consider to save to enjoy what most consider to be a comfortable retirement? be a comfortable retirement?

What is the best way to enable What is the best way to enable Canadians to save, invest and Canadians to save, invest and prepare for retirement?prepare for retirement?

33

Is there a crisis?Is there a crisis? Three basic viewpoints:Three basic viewpoints:

– No real crisisNo real crisis the overall system is strong and the overall system is strong and elderly poverty rate is low, only minor elderly poverty rate is low, only minor refinements neededrefinements needed

– A temporary crisisA temporary crisis due to economic and due to economic and financial market downturns in 2008-09, and financial market downturns in 2008-09, and some “under-saving” some “under-saving”

– A systemic crisisA systemic crisis inadequate and declining inadequate and declining private sector coverage, solvency problems of private sector coverage, solvency problems of some benefit plans, longer life expectancies, some benefit plans, longer life expectancies, and high debt loads among Canadian families and high debt loads among Canadian families

44

What are Canadians What are Canadians doing?doing?

September 2009 TD Canada Trust survey found that September 2009 TD Canada Trust survey found that 80% of Canadians found saving money “too hard”80% of Canadians found saving money “too hard”

November 2009 Royal Bank of Canada poll November 2009 Royal Bank of Canada poll indicated: indicated: – fully one-third of all Canadians had no retirement fully one-third of all Canadians had no retirement

savingssavings– Only about half of Canadians 55 years or older have Only about half of Canadians 55 years or older have

made retirement plansmade retirement plans April 2010 Investors Group survey found that 62% April 2010 Investors Group survey found that 62%

of Canadians plan to carry debt such as mortgages of Canadians plan to carry debt such as mortgages into retirement yearsinto retirement years

Delaying planned retirements and working longerDelaying planned retirements and working longer Some recently retired returning to work Some recently retired returning to work

55

Recent public policy Recent public policy actionsactions

Increased age limit for maturing RRSPs Increased age limit for maturing RRSPs and pensions from age 69 to 71and pensions from age 69 to 71

Increased pension surplus threshold for Increased pension surplus threshold for defined benefit Registered Pension Plans defined benefit Registered Pension Plans (RPPs) from 10% to 25%(RPPs) from 10% to 25%

Pension income splitting for seniorsPension income splitting for seniors Tax-Free Savings Account (TFSA)Tax-Free Savings Account (TFSA) Registered Disability Savings Plan (RDSP) Registered Disability Savings Plan (RDSP) Modest changes to Canada Pension PlanModest changes to Canada Pension Plan

66

Trends in private Trends in private pensionspensions

Shift away from Defined Benefit (DB) plansShift away from Defined Benefit (DB) plans

Increase in Defined Contribution (DC) Increase in Defined Contribution (DC) plansplans

Growth in Group RRSPsGrowth in Group RRSPs

Increase in Deferred Profit Sharing Plans Increase in Deferred Profit Sharing Plans (DPSP)(DPSP)

77

Possible public solutionsPossible public solutions Public programsPublic programs

– Increase GIS benefitsIncrease GIS benefits– Review OAS/GIS systemReview OAS/GIS system– Provincial elderly benefitsProvincial elderly benefits

Canada/Quebec Pension PlansCanada/Quebec Pension Plans– Raise the benefit rate and/or the yearly maximum Raise the benefit rate and/or the yearly maximum

pensionable earningspensionable earnings– Improve access to CPP Disability benefitsImprove access to CPP Disability benefits

A new national (or provincial or regional) A new national (or provincial or regional) supplementary pension plansupplementary pension plan

– Government-sponsored, automatic enrolment like a Government-sponsored, automatic enrolment like a second tier to the C/QPP with a defined contribution second tier to the C/QPP with a defined contribution and individual accounts, locked-in for retirement and individual accounts, locked-in for retirement

88

Possible ‘private’ Possible ‘private’ solutionssolutions

Increase contribution limits on RRSPs and TFSA'sIncrease contribution limits on RRSPs and TFSA's Extend Pension Credit to apply to everyoneExtend Pension Credit to apply to everyone Raise the age people must switch RPPs and RRSPs Raise the age people must switch RPPs and RRSPs

to Registered Retirement Income Funds (RRIFS) to Registered Retirement Income Funds (RRIFS) from 71 to 73 from 71 to 73

Extend spousal income-splitting to RRSP holders as Extend spousal income-splitting to RRSP holders as exists for RPP membersexists for RPP members

Allow employers to deduct from payroll tax base Allow employers to deduct from payroll tax base their contributions to groups RRSPstheir contributions to groups RRSPs

Permit insurance companies and other providers to Permit insurance companies and other providers to offer multi-employer pension plansoffer multi-employer pension plans

Allow physicians to contribute to group pension Allow physicians to contribute to group pension plansplans

99

Next stepsNext steps

What What issuesissues face you, your family, face you, your family, your neighbours, your co-workers in your neighbours, your co-workers in saving and planning for retirement?saving and planning for retirement?

What do you think of the What do you think of the proposals proposals being presented by various groups?being presented by various groups?

What What policypolicy changeschanges would like to would like to see in order to move toward all see in order to move toward all Canadians having a secure retirement Canadians having a secure retirement income? income?