Canada's Prime Minister Stephen Harper gestures before the Speech from the Throne in the Senate chamber on Parliament Hill in Ottawa March 3, 2010.CHRIS WATTIE
The Harper government is launching a cross-country debate on Canada's pension system, asking Canadians what it will take to get them to save more for retirement and what should be done to keep those savings safe.
The consultations, which Finance Minister Jim Flaherty will announce within days, come as many Canadians emerge from the economic crisis poorer and wiser.
Ottawa's own recession-induced cash problems contribute to the debate. This week's federal budget forecasts 5-per-cent annual increases in elderly benefits due to an aging population at a time when the government is trying to rein in spending. Public-sector unions fear their own pensions are at risk as governments look to squeeze staffing budgets.
At the individual level, several studies warn that middle-class Canadians simply aren't saving enough.
Last year's recession ravaged RRSP balances and drove Canadian companies like Nortel into bankruptcy. Nortel employees then were shocked to discover their pension plan was underfunded by billions of dollars.
In public meetings and online, Canadians will be asked for their views on potential reforms ranging from tweaks to major new savings vehicles. The debate is fraught with peril for federal and provincial governments, because proposed solutions could pit young against old or rich against poor.
Pension policy experts say the coming weeks are a rare window of opportunity for historic improvements while the hard lessons of the recession are still fresh.
"We're still in a sweet spot in terms of being able to galvanize people to do something about this," said Moshe Milevsky, a York University finance professor who contributed to the March issue of the public policy magazine Policy Options, devoted almost entirely to debating the proposals at hand.
"The financial crisis has taught us a very, very important lesson that's related to pensions and that lesson is that an RRSP, as large as it is, is not a pension, because from one year to the next, it can lose a quarter of its value," he said.
The goal of the government's tour will be to produce clear recommendations for a federal-provincial finance ministers' pension summit in May.
Proposals up for discussion include raising the mandatory payroll contributions to the Canada Pension Plan, allowing employers and workers to access a supplementary version of the CPP, encouraging new privately run savings plans, or expanding tax shelters like RRSPs and tax-free savings accounts.
There are also calls for regulations that would require private pension plans to be well funded and more transparent, much like the rules for banks and insurance companies.
"We haven't taken any of the options off the table," said Conservative MP Ted Menzies, the Finance Minister's parliamentary secretary.
In addition to the government-led consultations, MPs on the House of Commons finance committee - including Mr. Menzies - are expected to hold their own hearings.
The Liberals are in favour of letting people have the CPP manage their retirement savings if they want to, and the NDP is siding with unions calling for a doubling of benefits under the existing system.
Liberal finance critic John McCallum said pension reform should be the finance committee's priority, but expressed skepticism that the government will take action three months from now when the consultations are complete.
"It's been on the table for months if not years, and what are they doing? Holding more consultations," he said. "I think there's fairly broad consensus for a supplementary Canada Pension Plan - which we have proposed - but I don't sense this government wants to go there at all."
Bill Curry