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When the country's finance ministers gathered at Meech Lake last week, one of the most troubling items on the agenda wasn't Ottawa's swollen $50-billion deficit – it was growing fears that many Canadians won't have sufficient savings to get them through retirement.

It's a problem – brought into sharper focus by the stock market meltdown – that some have called a defining issue for this generation.

It's estimated that roughly five million Canadians – one-third of the work force – are not building enough of a nest egg to avoid a significant drop in living standards when they retire.

“ If we don't address this now, it's going to be a rude awakening.”— Ontario Finance Minister Dwight Duncan

While most public-sector employees have the security of taxpayer-backed pension plans, a staggering three-quarters of Canadians in the private sector have no plan at all. And many existing plans – especially defined benefit plans that guarantee a level of income – are facing shortfalls.

That leaves many Canadians more reliant on their registered savings plans that have taken a beating in the market meltdown and are expected to provide thin returns through a tepid global recovery.

“More and more people are going to start realizing they don't have enough savings,” Ontario Finance Minister Dwight Duncan predicted.

He and his provincial counterparts joined federal Finance Minister Jim Flaherty last week in launching a sweeping reappraisal of retirement savings – one that's set to spark a heated debate about whether to expand the Canada Pension Plan or create some other supplemental scheme.

“If we don't address this now, it's going to be a rude awakening,” Mr. Duncan said.

Few except the wealthiest are insulated and the hardest hit will include the so-called “sandwich generation” – those raising children and saving for their educations while supporting aging parents.

Mr. Duncan said the costs of caring for his elderly parents, who died in 2008, included $4,000 in monthly medical bills not covered by the public health system. Fortunately, he said, his parents – like many of their generation – had planned adequately.

But he and many provincial counterparts worry Canadians today are not similarly prepared.

It's a problem that has increasingly vexed provinces such as Ontario, Alberta, British Columbia and Nova Scotia. All have been concerned about a steady decline in residents covered by workplace pension plans – schemes that are supposed to be part of a key pillar of retirement income in Canada.

For instance, private-sector workplace pension coverage fell from 30.5 per cent in Canada in 1991 to 23.7 per cent in 2006.

A string of provincial commissions aimed at preserving private-sector pension plans heard warnings that this erosion will likely continue. Relatively few new companies offer defined benefit plans and some existing firms are lightening their pension obligations. These provincial reviews all suggested governments should think seriously about stepping in to create supplemental plans to fill the gap. The alternative, the Ontario review predicted, is more cash-strapped elderly and a rising bill for society including “declining markets for goods and services purchased by seniors, declining tax revenues and increasing public welfare costs.”

CPP, another pillar of the retirement system, is not currently designed to offer anything but modest support. Funded by worker and employer contributions, it's set up to replace just 25 per cent of preretirement income.

“ People are probably going to be disappointed in the type of payout they will get. If you could do 5 or 6 per cent [returns] over the next decade, I think you would be doing extremely well. ”— Toronto-Dominion Bank chief economist Don Drummond

Finally, registered retirement savings plans, intended to supplement CPP, haven't yielded as big savings as their architects had hoped – “except for those who are quite wealthy,” Toronto-Dominion Bank chief economist Don Drummond said.

To illustrate: If Canadian families are divided into five tiers by net worth, even the second-wealthiest group had only a median holding of RRSPs worth $35,000, according to the most recent data from Statistics Canada.

And Canadians, licking their wounds from the market meltdown, shouldn't expect eye-popping investment returns over the next 10 years, Mr. Drummond cautioned.

“People are probably going to be disappointed in the type of payout they will get. If you could do 5 or 6 per cent [returns] over the next decade, I think you would be doing extremely well.”

This helps explain why the debate has provinces looking at creating new pension plans to bolster retirement income, helped along by proponents such as Keith Ambachtsheer, director of the Rotman International Centre for Pension Management. He's been advocating that Ottawa refuse to be a “passive bystander ... watching all this happen,” and instead help fix things.

Alberta Finance Minister Iris Evans said last week that the federal-provincial working group on retirement savings – due to report late this year – could lead to a new retirement savings scheme for Canadians.

“It could result in another way of saving – perhaps a supplemental to the Canada Pension Plan,” she said of the scheme that's run jointly by Ottawa and the provinces.

Ted Menzies, a Conservative MP and parliamentary secretary to the federal Finance Minister, will head the working group. One of the questions it will face is whether a new plan should be compulsory or voluntary.

Mr. Menzies is still not certain there's a problem that needs fixing. And he's not keen on any mandatory expansion of retirement savings that would compel Canadians and employers to contribute more –saying that strikes him “as a bit of a nanny state situation.”

Still, he acknowledged there are valid concerns that must be addressed. “This is for Canadians to make sure we're not abandoning Canadians.”

Another thorny issue in the retirement savings debate is the future of the relatively generous, taxpayer-guaranteed pensions of government employees. More than 80 per cent of bureaucrats in Canada have workplace pensions, the vast majority of which promise a specific payout upon retirement.

“In the coming decade, a dramatic have-have not divide will become increasingly apparent – between those with relatively rich, taxpayer guaranteed defined-benefit pensions, and the rest of us,” Finn Poschmann, vice-president of research at the C.D. Howe Institute, said.