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ian mcgugan

Canada's retirement system is better than those in many other countries. But it can – and should – be improved.

The Melbourne Mercer Global Pension Index, which rates retirement plans around the world, gives the Canadian system a "B" grade, putting us roughly on par with Britain, Sweden and Singapore. We're ahead of the United States and Germany, but well behind Denmark and Australia.

Now, with the federal election campaign heading into its final weeks, it's an excellent time to assess what the winning party can do to boost our standing in this area.

Given the generally robust state of the Canadian system, it's unlikely that major reform is on the horizon. Here instead are four suggestions for modest changes that could help us inch closer to earning an "A" in retirement.

Get cheap

Back in 2010, the Department of Finance asked Edward Whitehouse, a leading pensions expert at the Organization for Economic Co-operation and Development, to provide an international perspective on Canada's retirement system. Among the key concerns he identified were the high charges facing RRSP savers, especially people who relied on actively managed mutual funds with annual fees of 2 per cent or more.

"The impact of charges on retirement incomes cannot be stressed enough: Moving from a levy of 2 per cent of assets to 0.5 per cent would increase net benefits by more than 40 per cent," he wrote.

Five years later, nothing has been done to address Canada's chronically high investment fees. One simple notion would be for the federal government to publish a constantly updated list of recommended low-cost funds and model portfolios that could serve as a reference tool for novice investors.

Invest in tools

Just as the system braces itself for the retirement of huge numbers of boomers, the government has cut funding for Statistics Canada's LifePaths database – its best guide to how future shifts in retirement policy will play out.

The decision, which took effect at the end of 2014, saves a bit of money now but leaves decision-makers without any comprehensive way to model the impact of possible multibillion-dollar changes to the retirement system. That is a false economy, according to retirement researchers such as Michael Wolfson of the University of Ottawa and Bonnie-Jeanne MacDonald of Dalhousie University.

The simple fix? Restore funding to the program.

Hold the line

Ottawa's decision to gradually raise the eligibility age for Old Age Security (OAS) to 67 from the current 65 should be re-examined.

The move hits hard at lower-income workers, who have considerably lower life expectancies than more affluent Canadians. It also punishes those in physically demanding jobs. Furthermore, it flies in the face of Mr. Whitehouse's analysis. He stated back in 2010 that there was no pressing financial or fiscal reason for Canada to boost the retirement age.

Despite alarmist rhetoric from some quarters, it's difficult to see how OAS could turn into an oppressive burden even if the eligibility age stayed at 65.

True, the system will face an onslaught of retiring boomers. However, it also enjoys a built-in buffer: OAS increases the benefits it pays in tandem with inflation, but those benefits are funded from tax revenue that rises in line with overall economic growth, which is nearly always higher than inflation.

The wedge between the two means the OAS program is unlikely to ever drive Ottawa into the poorhouse.

Stress education

Encouraging people – especially skilled workers – to stay on the job longer can help boost economic growth. But that doesn't mean people should be forced to work into their mid-70s.

"The issue largely concerns those between the ages of 55 and 64, which is when most Canadians leave the world of work, not those who are aged 65 and over," according to Cliff Halliwell, former director-general of policy research at Human Resources and Skills Development Canada, in a 2013 report for the Institute for Research on Public Policy.

He argues that one of the most effective ways to encourage people to stay on the job into their mid-60s is to educate them about the real cost of retirement given today's longer life spans and low interest rates. "People need to understand that adequacy of retirement income tomorrow inevitably entails greater savings and work effort today," he writes.

Government could play an important role by encouraging financial literacy. Less emphasis on Freedom 55 and more on Security 65 could persuade more Canadians to work until the official retirement age.