Finance ministers ponder pensions

Last week, finance ministers agreed changes must be made to the Canadian pension system. But it will be some time before Canadians find out what these changes will be.

Last week, finance ministers agreed changes must be made to the Canadian pension system.

But it will be some time before Canadians find out what these changes will be.

“We agreed that we would move forward to the next stage, which is to drill down on the options with respect to pension reform,” said Canadian Finance Minister Jim Flaherty in Whitehorse on Friday afternoon.

“The ministers agreed that our officials will work collaboratively over the next few months to assess these options.”

The ministers will consider specific recommendations at the next finance ministers meeting in May.

Consensus was reached on the point that whatever solution is finally considered, it should be a pan-Canadian plan.

“We know Canadians move around the country – as they should – to seek work and so on,” said Flaherty.

“And we want to make sure that pension coverages are uniform across the country and someone doesn’t jeopardize their pension coverage because they take a job somewhere else.”

The politicians also discussed the economic stimulus plan and financial literacy at the meeting.

The issue of financial literacy reflects on the need for pension reform, said Flaherty.

“We need to make sure that Canadians are aware of and educated with respect to the savings tools that are available to them, such as RRSPs, tax-free savings accounts, the registered educational savings plan, registered disability savings plans, and so on.”

More than 11 million Canadians don’t have an employer-sponsored pension plan, according to the Canadian Labour Congress.

And 1.6 million seniors live on less than $11,300 a year.

The labour group is lobbying for a doubling of Canadian Pension Plan benefits.

The finance ministers did not agree the Canadian pension system was in crisis.

“Research tells us that our retirement income systems are in good shape, said Flaherty.

“There may be room for improvement; we need to focus on that, drill down on it and make sure we get it right.”

Expanding the CPP would have the effect of a payroll tax, which would affect the recovering economy, Flaherty added.

In BC and Alberta, only 20 per cent of private-sector workers are covered by company pension plans.

The two provinces were threatening to create their own public supplement to the Canadian Pension Fund if there was no progress at the meeting.

“It was a dilemma for us,” said BC Finance Minister Colin Hansen.

“Do we push ahead, or work together with other Canadian provinces and build that national consensus?”

Both BC and Alberta agreed that it would be better to wait for a pan-Canadian plan.

Hansen previously promised BC residents that they’d have a supplemental plan sometime in 2010.

“That timeline would now be optimistic,” he said.

“But we have also expressed our point of view that if there is not a consensus that can be arrived at in a reasonable length of time then we are prepared to proceed with structuring a supplemental plan that involves a grouping of provinces.”

The two western provinces are not locked into the supplemental pension plan option, said Hansen.

“We have a whole series of options that the provinces and the federal government are going look at,” he said.

“We promised we would look at all the options; we’re not going to take any option off the table yet, until we have some definitive research done.”

“At the end of the day, it may be a combination of options,” he added.

Hansen echoed Flaherty and the other ministers, saying that we do not have a pension crisis in Canada.

“Canada is recognized globally as being one of the countries that has one of the lowest poverty rates among seniors of any of the OECD countries,” he said.

“We want to make sure we protect that.”

The Canadian Labour Congress believes the system is in crisis and supplementing the Canadian Pension Plan is the best way to deal with the issue.

What the country doesn’t need is more studies into pension reform, said Joel Harden, of the Canadian Labour Congress.

“Some shelves in Ottawa are breaking under the weight of all of the studies that have been conducted on this issue.”

The system is fine for those few Canadians with a defined benefit plan, said Harden.

“But even for those folks, if your employer finds itself in bankruptcy, things you could work decades for could be lost in an instant.”

The labour congress would like to see Ottawa insure these private pension plans in case of bankruptcy.

Harden also took issue with the comment made by many of the ministers that pension problems are mainly affecting middle-income Canadians.

“This is a Canadian issue that affects all Canadians,” said Harden.

“Much like Medicare, we all put in a little bit and we all benefit.”

Harden felt confident that once a national debate is started on pensions in this country, many more Canadians will come forward to ask for significant reform.

“I’ve talked to people that have had to budget food or had to eat peanut butter for days in a row,” Harden added.

“I’ve talked to people who are really suffering out there.”

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