1 Fixing Our Pension Crisis: Toward retirement security for everyone Remarks for a Community Pension Forum May 19, 2010 Michael J. Prince Lansdowne Professor of Social Policy

2 What is the question? Are Canadians saving enough for retirement? Are Canadians saving enough for retirement? What do people of different incomes and different age groups need to save to enjoy what most consider to be a comfortable retirement? What do people of different incomes and different age groups need to save to enjoy what most consider to be a comfortable retirement? What is the best way to enable Canadians to save, invest and prepare for retirement? What is the best way to enable Canadians to save, invest and prepare for retirement?

3 Is there a crisis? Three basic viewpoints: Three basic viewpoints: –No real crisis the overall system is strong and elderly poverty rate is low, only minor refinements needed –A temporary crisis due to economic and financial market downturns in , and some “under- saving” –A systemic crisis inadequate and declining private sector coverage, solvency problems of some benefit plans, longer life expectancies, and high debt loads among Canadian families

4 What are Canadians doing? September 2009 TD Canada Trust survey found that 80% of Canadians found saving money “too hard” September 2009 TD Canada Trust survey found that 80% of Canadians found saving money “too hard” November 2009 Royal Bank of Canada poll indicated: November 2009 Royal Bank of Canada poll indicated: –fully one-third of all Canadians had no retirement savings –Only about half of Canadians 55 years or older have made retirement plans April 2010 Investors Group survey found that 62% of Canadians plan to carry debt such as mortgages into retirement years April 2010 Investors Group survey found that 62% of Canadians plan to carry debt such as mortgages into retirement years Delaying planned retirements and working longer Delaying planned retirements and working longer Some recently retired returning to work Some recently retired returning to work

5 Recent public policy actions Increased age limit for maturing RRSPs and pensions from age 69 to 71 Increased age limit for maturing RRSPs and pensions from age 69 to 71 Increased pension surplus threshold for defined benefit Registered Pension Plans (RPPs) from 10% to 25% Increased pension surplus threshold for defined benefit Registered Pension Plans (RPPs) from 10% to 25% Pension income splitting for seniors Pension income splitting for seniors Tax-Free Savings Account (TFSA) Tax-Free Savings Account (TFSA) Registered Disability Savings Plan (RDSP) Registered Disability Savings Plan (RDSP) Modest changes to Canada Pension Plan Modest changes to Canada Pension Plan

6 Trends in private pensions Shift away from Defined Benefit (DB) plans Shift away from Defined Benefit (DB) plans Increase in Defined Contribution (DC) plans Increase in Defined Contribution (DC) plans Growth in Group RRSPs Growth in Group RRSPs Increase in Deferred Profit Sharing Plans (DPSP) Increase in Deferred Profit Sharing Plans (DPSP)

7 Possible public solutions Public programs Public programs –Increase GIS benefits –Review OAS/GIS system –Provincial elderly benefits Canada/Quebec Pension Plans Canada/Quebec Pension Plans –Raise the benefit rate and/or the yearly maximum pensionable earnings –Improve access to CPP Disability benefits A new national (or provincial or regional) supplementary pension plan A new national (or provincial or regional) supplementary pension plan –Government-sponsored, automatic enrolment like a second tier to the C/QPP with a defined contribution and individual accounts, locked-in for retirement

8 Possible ‘private’ solutions Increase contribution limits on RRSPs and TFSA's Increase contribution limits on RRSPs and TFSA's Extend Pension Credit to apply to everyone Extend Pension Credit to apply to everyone Raise the age people must switch RPPs and RRSPs to Registered Retirement Income Funds (RRIFS) from 71 to 73 Raise the age people must switch RPPs and RRSPs to Registered Retirement Income Funds (RRIFS) from 71 to 73 Extend spousal income-splitting to RRSP holders as exists for RPP members Extend spousal income-splitting to RRSP holders as exists for RPP members Allow employers to deduct from payroll tax base their contributions to groups RRSPs Allow employers to deduct from payroll tax base their contributions to groups RRSPs Permit insurance companies and other providers to offer multi-employer pension plans Permit insurance companies and other providers to offer multi-employer pension plans Allow physicians to contribute to group pension plans Allow physicians to contribute to group pension plans

9 Next steps What issues face you, your family, your neighbours, your co-workers in saving and planning for retirement? What issues face you, your family, your neighbours, your co-workers in saving and planning for retirement? What do you think of the proposals being presented by various groups? What do you think of the proposals being presented by various groups? What policy changes would like to see in order to move toward all Canadians having a secure retirement income? What policy changes would like to see in order to move toward all Canadians having a secure retirement income?