Policy & Positions Manual
National Issues - Service Canada
Acknowledgment of the Base Principles of Pension Reform (2010)
Statement of the Problem
While some Canadians are prepared and will be sufficiently funded for retirement, either through private or public service pension plans or through their own prudent planning, it is generally acknowledged that many are not. Within the next decade, Canada will see millions of baby boomers enter retirement, many without sufficient savings to sustain a reasonable standard of living.
Although the impact of this shortfall is unclear, the risks to our economy and the stability of government funded old age benefits are so significant that immediate action is warranted.
The Chamber agrees that the fundamentals of the retirement income system are strong. However, there are significant challenges that unless addressed, will impact the ability of many retirees to live out their retirement in dignity. The Chamber believes that Government must continue to engage business in developing recommendations to ensure that it can provide for seniors without putting stress on government budgets and forcing business and younger Canadians to carry the burden through increased taxes.
Details of the Problem
Over the next two decades, Canada will see an unprecedented number of people enter retirement. Dealing with shortfalls for underfunded senior citizens is a complex problem, and one that requires Government attention immediately.
Not every Canadian has had an opportunity to participate in a private or public sector pension plan, and the Canada Pension Plan will not meet the needs of many seniors. The stock market upheaval of 2008 saw many Canadians sustain heavy losses in their personal retirement portfolios.
Further exacerbating the problem is the disparity of retirement preparedness for different groups of Canadians. Civil service pensions have traditionally been richer than private pensions. Self-employed Canadians, or those without any kind of pension plan, are being left far behind even though they have may worked longer and harder than their fellow retirees.
Asking Canadians to endure a tax hike in order to close the gaps is rightly seen as unfair and represents an excessive burden to younger generations. The Chamber congratulates the Federal Government for recognizing the importance of this issue and their efforts to solicit input through the Ensuring the Ongoing Strength of Canada’s Retirement Income System. The Chamber was particularly pleased to see that this consultation process was underpinned by a set of principles:
- “The system should remain affordable for individuals and businesses;
- Costs incurred by governments should be appropriate and affordable, as well as sustainable over the long-term;
- The system should function so that it does not transfer costs from one generation to another;
- There should continue to be an appropriate balance maintained between individual and government responsibility for retirement savings, and an appropriate level of individual choice; and
- The system should remain accessible to all Canadians.”
The Chamber endorses these principles as the foundation of any recommendation for change, and is also pleased to see that efforts are being made to find solutions on a partnership basis with the provinces and territories.
However, the Chamber is concerned that there is a lack of clarity regarding next steps and timelines. The Chamber believes it is critical that to ensure this process moves forward in an expeditious manner, a clear and binding timetable be developed for the publication of recommendations, that these recommendations be open for public and stakeholder input, and that a timetable for legislative changes be introduced.
There may be reforms related to estate issues, the employment insurance program or other initiatives to reduce government overhead that could mitigate the pension funding issues. There may be a need for a retirement education program to help Canadians prepare for retirement costs, or there may be a need to create a mandatory individual retirement plan directed by accredited planners.
There may be some immediate reforms that can be made, and there may be some longer term solutions to be found. The important fact is that we begin to approach the situation.
THE CHAMBER RECOMMENDS
That the Federal and Provincial Governments:
- continue to engage Canadian business in a dialogue around any potential recommendations;
- make a public commitment to providing draft recommendations within one year; and
- amend existing pension legislation within the next 5 years.
