As the debate over pension reform continues to spawn considerable discussion in Canada, two noteworthy commentaries on the state of this country’s pension system have been issued within the past week.
On October 14th, the first Melbourne Mercer Global Pension Index was released. This study, which was produced by the global consulting firm, Mercer, and sponsored by the government of the Australian state of Victoria, ranked Canada's retirement system fourth in the world based on a number of criteria relating to the adequacy, sustainability and integrity of the world’s pension systems. No country received an “A” grade.
The study found that Canada’s ranking could be improved by: (1) increasing the level of pension coverage; (2) ensuring that voluntary retirement savings are preserved for retirement purposes; (3) increasing the pension age as life expectancy continues to increase; and (4) increasing the level of household savings.
Then, on October 17th, the Globe & Mail newspaper began a week-long series addressing the perceived national crisis facing the retirement system in this country. The series is slated to discuss the impact of the current recession on pension plan funding; the fight between plan members and creditors over limited assets when plan sponsors become insolvent; the unavailability of pension plans to the self-employed, professionals, and many of those working in small businesses; and, the divergence of views on the best way forward for the system between those in the business of providing pensions and those who believe a new public pension option is needed.
These calls for action come almost a year after expert reports commissioned by governments were published in Ontario (PDF), Nova Scotia (PDF) and Alberta / British Columbia (PDF) (of which I served as co-chair). Each of those reports called for fundamental and meaningful reforms to the pension laws and pension systems in their respective provinces. The reports also encouraged national dialogue on the issues, including calls to pursue greater harmonization of rules across Canadian jurisdictions.
However, little meaningful action has been taken by governments to date.
The aspects of the three reports that have generated the most attention thus far were recommendations that the various governments take steps to establish new pension vehicles that would be broadly available to those currently without an occupational pension plan. Earlier this year, a federal/provincial working group, chaired by Alberta MP Ted Menzies, with participation from Ontario, Nova Scotia, British Columbia, Alberta and Manitoba, was established to study the viability of such proposals (among other issues). That working group is scheduled to report prior to the end of 2009. However, in the meantime, the Premiers of Alberta, British Columbia and Saskatchewan have announced their intention to proceed with development of such a plan unless substantial progress is made towards a national plan before the year is out.
What does all of this mean for the possibility of a pan-Canadian solution to the pension dilemma?
The leadership being shown by the three Western Premiers is commendable and, indeed, necessary. However, three things remain clear.
- First, the time for study and analysis is over. With each passing day, the problems in our system only grow.
- Second, if our federal leaders fail to react to the pressing need on a timely basis, the provinces will pursue their own regional initiatives. This will result in further fragmentation of the patchwork quilt that is the current pension system in Canada.
- Third, concerted leadership at the highest political levels in Ottawa and the provincial capitals will be needed in order for any meaningful results to be produced on a national scale. Time will tell if our elected representatives are up to that challenge.
