FOR IMMEDIATE RELEASE
October 28, 2009
CARP Welcomes changes to better protect pensions – it is only a First Step in the Right Direction
TORONTO, ON: CARP welcomes the federal pension reform proposals as a long overdue but important first step in better protecting the retirement security of Canadians who have federally regulated pension plans. But this does not help those pensioners whose plans are already at risk and leaves out in the cold the estimated 11 million Canadians who do not have any workplace pensions at all.
Finance Minister released a series of recommendations that will better protect pension plan members by: [among other things] http://www.fin.gc.ca/n08/09-103-eng.asp
by requiring higher solvency position before allowing contribution holidays; and benefit improvements encouraging more stable funding by increasing pension surplus threshold from 10% to 25% – this will also apply to provincial plans because change is to the Income Tax Act requiring employers to fully fund benefits on termination –there are no rules now but this is a catch up to what provinces already stipulate
“People who already have pension plans will be encouraged by these changes especially if the provinces follow suit. But the devil is in the details: employers are not exactly lining up now to put more money into their pension plans so the increased surplus limit sounds good but may have no practical effect. Further, changes may actually cancel each other out – even if employers increase the surplus to 25% in good times, they can draw it down to 5% through contribution holidays – so the actual working cushion would be no better than it is now,” said Susan Eng, Vice President, Advocacy of CARP.
There are no proposals that would help pensioners whose employers are currently facing bankruptcy and unable to make up deficiencies, like the Nortel pensioners, nor to deal with the estimated $50 billion deficit in private pension funds nationally.
But the biggest deficiency is the lack of any proposal to encourage and help the estimated 11 million Canadians without any workplace pension to better save for their own retirement.
CARP has recommended the creation of a Universal Pension Plan Click here to read our policy paper
universally accessible and affordable provides an adequate retirement pension robust enough to withstand market and demographic challenges “There is a building consensus that Canadians must save more for their own retirement but they need access to the larger well managed and cost effective vehicles that 85% of the public service and only 25% in the private sector can access. The government must step forward to create a Universal Pension Plan to help people help themselves,” added Eng.
CARP welcomes the sense of urgency demonstrated by this early release of the federal proposals before even the government’s own Research Working Group has reported its findings and without the apparent input of the Provinces which govern over 90% of all Canadian pension plans but is concerned that this may lead to a piecemeal approach that that will hinder progress on comprehensive pension reform that also deals with the retirement security of those who do not have any workplace pensions.