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THE PENSION PAPERS
In this issue...
Canadians successfully reformed the Canada/Quebec Pension Plans in the 1990s. Now we must do the same for the rest of our Retirement Income System. This paper offers both a vision and a plan to provide a decent post-work standard of living for the millions of Canadian workers currently accumulating insufficient retirement savings.
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THE STUDY IN BRIEF
"Even as Canadians seek to deal with the short-run problems of traditional DB plans then, they need to develop new models that offer attractive ways to pool resources and save for retirement, while mitigating not only financial risk and longevity risk, but agency risk as well."
David Laidler
William Robson
This Commentary is a logical sequel to last year's inaugural paper in the C.D. Howe Institute's Pension Paper Series. As cited above, Mssrs. Laidler and Robson issued a challenge for Canadians in Ill-Defined Benefits: the Uncertain Present and Brighter Future of Employee Pensions in Canada. I do indeed develop a new pension model for Canadians to think about the context and dynamics of generating adequate, affordable post-work income in the 21st century. The model has three critical elements:
1. A retirement savings accumulation/decumulation formula likely to generate adequate, affordable post-work lifetime payment streams.
2. Complete workforce coverage and job-to-job portability across Canada.
3. Pension delivery institutions that are transparent and cost-effective, and operate solely in the best interests of the people they are meant to serve.
The new pension model addresses two major shortcomings in workplace pension plans and individual retirement savings. First, an estimated 3.5 million Canadian workers are not members of a workplace pension plan, and are not accumulating sufficient retirement savings to maintain a decent post-work standard of living. The second shortcoming relates to the 5.5 million Canadian households who currendy have their retirement assets invested in retail products with high sales and management costs, which make it difficult for many of these 5.5 million households to generate adequate pension income at affordable retirement saving rates.
To address these flaws, the paper offers the Canada Supplementary Pension Plan (CSPP) as a solution...