I am pleased to be given this opportunity to outline to CARP members how the McGuinty government is protecting and strengthening our province’s pension system.
The global economic downturn highlighted that many Ontarians are not saving adequately for retirement. Families have increased concerns about their futures after retirement, and retirees have added concerns about how they will continue to live within their current lifestyles. Research, policy work and consultations have confirmed that although our retirement income system has many strengths, a significant minority of Canadians in the future are likely to experience a material decrease in their standard of living upon retirement unless changes are made.
The McGuinty government is calling for reforms that would equip tomorrow’s seniors with better tools to maintain their standard of living in retirement, while building upon the strengths and institutions of the existing retirement income system.
At the last meeting with my federal and provincial counterparts I proposed reforms to the Canadian Retirement Income System.
First, I called for regulatory changes to harness Canada’s world leading private-sector expertise to provide more efficient, lower-cost retirement options. By expanding the range of people who can set up pension plans, and the range of people who can access them, we could allow large, multi-employer defined contribution pension plans with low administrative costs to provide portable coverage to more Canadians.
Secondly, I advocated for building on the strengths of the CPP through a phased-in, moderate increase to retirement and survivor benefits. CPP’s guaranteed benefits are secure, inflation-indexed, and portable. The average CPP benefit is about $6,000 per year and the maximum is about $11,000 per year – lower than the public employment-related pensions of most other similar countries. Any improvements would have to be pre-funded, intergenerationally equitable, and affordable for working people and employers.
In Ontario, we will be introducing reforms in the Legislature this fall that would modernize Ontario’s pension legislation. These reforms would build upon reforms already passed in the Pension Benefits Amendment Act, 2010, and reflect consultations with stakeholders, discussions with members of the Canadian Institute of Actuaries, and input from the Advisory Council on Pensions and Retirement Income. This second set of reforms would:
• Require sustainable funding of promised benefits and tougher funding standards for benefit improvements.
• Clarify pension surplus rules and provide a dispute resolution process to allow members, retirees and sponsors to reach agreements on how surplus should be shared on wind up.
• Provide a more sustainable Ontario’s Pension Benefits Guarantee Fund by implementing a strategy to build reserves, increase revenues, limit current exposure and reduce risk to taxpayers in the future. The Ontario government has already provided an additional $500 million to the PBGF, so it may continue to provide critical assistance to pensioners and plan members – like Nortel – when their plans are wound up with insufficient funds to cover the promised benefits.