What Do I Need to Know About Pension Protection in Canada?
CARP has advocated for pension protection for twenty years. In recent years, this issue has gained traction and CARP and allies’ dogged advocacy has paid off.
Until 2023, the law dictated that when companies go bankrupt the assets of the failed company were divided and banks paid first. The unexpected loss of income from an incomplete pension plunged vulnerable seniors into poverty.
Pensions are deferred wages, earned while Canadians are working and paid after they retire. CARP and allies have argued for years that pensioners and active plan members deserve the full pension that they have earned and their employers committed to. Pensioners should not be collateral damage in insolvency.
- The risk to defined benefit pensions occurs when a company becomes insolvent and its pension is underfunded.
- Without this recent legislation, when companies were in trouble but hadn’t yet become insolvent, pensioners were powerless to intervene and secure their pensions. All other creditors could negotiate terms to protect their interests.
- An estimated 78% of defined benefit pension plans in Ontario are underfunded. In the event of an insolvency, prior to this legislation, these pensioners would not receive their full pension. This put an estimated 850,000 pensioners at risk. (FSCO 2018)
Time and time again CARP members tell us that financial security is their #1 concern. Pension protection is a concrete way to effect real change for seniors at no cost to taxpayers.
How is CARP Advocating?
In the spring of 2022, CARP joined advocates including the Canadian Federation of Pensioners and Canadian Network for the Prevention of Elder Abuse in writing an open letter to the government, urging them to step up and protect vulnerable pensioners. Read the letter.
Canada lags behind other similar countries in pension protection. The bill, if implemented well, would protect the 4.6 million Canadian seniors and their families who rely on defined benefit pensions for their financial security in retirement.
In early 2022, a private members bill, Bill C-228 was introduced. Bill C-228 has now been approved by the house and senate. Now government has to make it legislation and the details of its implementation determined.
CARP’s demands of government
- Create a pension insurance program that insures 100% of the pension liability.
- Amend insolvency legislation to extend super-priority to the unfunded pension liability.
- Commission a third-party study to explore alternative legislative and regulatory solutions that will ensure pensioners receive 100% of their pensions in the event of corporate insolvency.
Here is the most recent CARP submission on the details related to the ombudsman governance and structure.
How Can I Get involved?
There are many ways to get involved. Find out more.