Amid the flurry of activity that marked the end of the fall session of Parliament, one new initiative bears a lot of attention.
Jim Flaherty unveiled the kind of idea that has potential to help deal with a worrisome situation for many Canadians, and at the same time expand the reach and appeal of the Conservative Party of Canada.
The Finance Minister's proposal to allow Canadians to put money in a Pooled Registered Pension Plan (defined contributions, managed by private-sector professionals) comes in the wake of a lack of clear consensus among federal and provincial politicians about possible changes to the CPP.
It's a timely alternative with breakthrough potential. Here's why:
» The nose of the baby boom touched 65 last year, and many, many more will cross that threshold in the next decade. A frightening proportion have done too little to plan for their retirement, and are now faced with the realization that government programs will be nowhere near adequate to help them live the lifestyle they want.
» With interest rates stuck at record lows, even those who start pumping cash into retirement savings accounts today will be losing ground to taxes and inflation unless they take some risk with their money. For the last few decades Canadians have been getting more comfortable with risk products such as equities but the global stock market meltdown slashed RRSP account values and shredded the self confidence of many retail investors.
» Among the casualties of the stock market collapse have been large defined benefit pension plans operated by large corporations for their employees. Recent problems only accelerated a trend that had been under way for years. The "get a job after school, stay with a company for decades and retire with its pension" life arc is rare indeed, at least in the private sector.
Thoughtful politicians, including Liberal Leader Michael Ignatieff, have been saying for some time that a crash of hopes about retirement life is imminent and solutions are urgent. But for a variety of reasons, (people scrambling to get through a recession, governments distracted by stimulus requirements and daunting fiscal pressures, etc.) there has been little forward movement, at least until now.
The Conservative idea contemplates private sector management of PRPP's whereas the Liberals seem drawn towards a payroll tick-off and public administration of funds, through a supplemental Canada Pension Plan.
Both ideas have merit, however the Flaherty concept may be better tuned to contemporary sentiment, and thus be a sharper political arrow. Many Canadians intuitively believe that private-sector investment managers are likely to generate better returns than public-sector organizations, and provided there is adequate oversight, the risk will be assumed to be no different.
As well, Canada's banks and other financial institutions, along with organizations like the Canadian Federation of Independent Businesses are enthusiasts of the Flaherty proposal, and their voices can help build momentum behind PRPPs. Conversely, there is little evidence that the necessary federal-provincial consensus can be mustered for changing the Canada Pension Plan.
In a year when too many voters continued to wonder if federal politics was focused on the biggest issues, the Conservatives have launched an idea that could be appealing to a broad swath of voters across different generations and in the centre of the spectrum, not only on the right. The Conservative base, including small business owners and self employed individuals will see it as a direct response to their needs, but large numbers of moderate income earning workers in all kinds of enterprises, who might have in the past been a little more drawn to the Liberal Party, will see something that can help them too.
For the Liberals, the best option may well be to support the Flaherty idea, rather than let the choice of options become a clear dividing line for voters to contemplate in the next election.