Changes may be needed to ensure Canada’s pension system remains viable for future generations, but Finance Minister Jim Flaherty says there is no need to rush because Canada’s retirement plan is the “envy” of the world.
Speaking ahead of National Retirement Income Summit in Calgary and as part of his Canada-wide consultation tour on pension reform, Mr. Flaherty said the Canada Pension Plan system remains well funded for at least the next 75 years, but many Canadians aren’t saving enough on their own to retire comfortably and don’t have a plan to help them when they leave the work force.
“I think it is a significant issue, but I do not think it is an issue of fundamental unsoundness in our system,” he said. “Most countries envy the solidity of our plan, so we start from a relatively good place, but that doesn’t mean there aren’t issues that we can address.”
Mr. Flaherty is travelling the country listening to suggestions for revamping the system. He will meet with provincial and territorial leaders in June in hopes of finding common ground on addressing what some are suggesting is a crisis in the making after several high-profile funds collapsed under the weight of their obligations earlier this year.
Companies such as Nortel Networks were unable to pay their obligations as contributions fell off and capital markets cut a deep hole into their funds through the recession. Low interest rates – expected for some time yet – have also eaten into the returns of many funds and put retirees at risk of lower payouts in the future.
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Alberta and British Columbia have suggested a new plan be created to supplement the Canada Pension Plan, but the federal government hasn’t indicated its willing to make major changes. On Monday, Mr. Flaherty said all options are on the table but that his first priority is to ensure the current system wasn’t compromised. There is evidence some Canadians aren’t saving enough, he said, and although “all options are being considered” radical changes are unlikely.
“It has to be dealt with carefully, judiciously and deliberately,” he said. “We can’t do this on the back of an envelope. The governments of today will be judged 40 years from now on whether we took the right steps or not. One can do harm to what is a sound system. We need to cover all the issues and don’t unintentionally cause detriment to the current system.”
A recurring complaint during his cross-Canada tour has been the perceived richness of pensions paid to members of Parliament and civil servants, he said. He’s an unbiased examiner, he said, because he doesn’t yet qualify for the federal plan and opted out of the pension plan when he was a provincial politician in Ontario.
“That is an issue that gets discussed when people from the private sector compare their pensions with those in the private sector,” he said. “Income levels were lower in the public sector than in the private, and that may or may not stand the test now – it is an issue that has come up more than once.”
An improving economy will not change the tone of the discussions, he said, because the recovery remains “fragile” and the United States and Western Europe still have major problems.
