Agreement grows that pension crisis needs public solution

Originally published on the Public Values website. To go to the Public Values Website please click here

Most Canadians don’t have workplace pension plans or adequate pension savings. Now, with millions of baby boomers getting ready to retire and an economic crisis that has left many private pension plans destroyed or terribly underfunded, a full-blown crisis has occurred with little public recognition.

“The issue today is that people have pension promises that were made [but] are not being kept because of the rules that govern existing pension plans. Worse, one in three Canadians do not have enough savings when they retire,” said Susan Eng, Vice President for Advocacy of CARP (formerly Canadian Association of Retired Persons). She was interviewed following a panel discussion on pensions in Ottawa organized by CUPE. “Some 75 percent of those outside the public service do not have any access to workplace pensions, so they’re on their own with RRSPs and so on. Most people cannot save enough for retirement.”

Workers with companies hit hard by the economic crisis have been among the first to experience the full brunt of the pension crisis. Approximately 20,000 pensioners and former employees of Nortel are struggling to come to grips with — and have governments deal with — the fact that pension plan into which they paid for years is now worth little or nothing.

“We have a whole group of ex-Nortel employees who were let go without severance or layoff or benefits,” said Mary Jane MacKinnon, a Nortel retiree who spoke on the panel. “That situation is desperate. “It’s a cruel state to be in at almost 61 years of age. “

“Instead of recipes on the kitchen table, I now have job applications. I’m going to have to get a job.”

The former Nortel workers may be in a better position than most, since very few private companies have workplace plans. Paul Moist, National President of CUPE is concerned with a “growing disparity, with 65 percent of Canadians having no workplace pension plan. In the private sector only one in five ” has one, and the numbers are dropping.”

The financial industries have promoted and lobbied for RRSPs and other programs that place responsibility for retirement savings in hands of workers. The reality is that most people cannot afford to, and do not, save enough for retirement on their own. Saving is even more difficult for young people and others with low-paying and insecure work. As a result, pressure will build for public action.

“Young people can’t afford to invest RRSPs or whatever,” said MacKinnon. “You’ve got people working a minimum wage, two jobs or three jobs, they can’t afford to do that.” She wants to see pension funds “that are truly guaranteed and funded properly,” and capable of withstanding economic downturns.

“The private pension industry would like to keep the business,” said Eng, “but at this point, hardly any employer is creating a workplace pension, even a defined contribution plan, because of the administrative costs and the fiduciary responsibility. So we won’t be seeing too much improvement in the private pension landscape unless, of course, they convince the government to force people to contribute and give the business to the private sector. We wouldn’t be recommending that.”