Ottawa and the provinces have agreed to take the first steps toward reforming the country’s retirement savings system, forging a consensus that was enough to keep Western finance ministers at the negotiating table.
The federal and provincial ministers wrapped up a day and a half of meetings in Whitehorse Friday, centred around making sure Canadians are saving enough for their retirement — especially as the population ages and government resources are strained.
They agreed that after months of researching pensions and retirement income, they now have enough information to start negotiating on actual reforms that would put the seniors of the future on a more stable financial footing.
“The first thing we have to make sure is we do no harm. And then the second thing is, what precisely, surgically, would be useful for Canadians’ retirement incomes later on,” federal Finance Minister Jim Flaherty told reporters in Whitehorse.
“We’re going to try and narrow down in the next two months, and then move forward on those particular aspects.”
They’ll start with a vigorous round of cross-country public consultations early in the New Year, and meet again in May in the hopes of making more concrete decisions about how the retirement system should change.
“I think this will allow us to move beyond high-level discussions,and now we can zero in,” Ontario Finance Minister Dwight Duncan said in an interview. “I think there’s a willingness to have an honest discussion.”
Alberta and British Columbia had threatened to take an independent path and set up their own supplement to the Canada Pension Plan unless Ottawa showed the will to set up a decent national system.
But both provinces seemed content, for now, with Ottawa’s commitment on Friday to examine a broad array of options.
“The provinces said unanimously that no province gets out ahead of the rest,” said Ted Menzies, the federal parliamentary secretary of finance who has been the lead Ottawa actor on the pensions file. “They all agreed that a pan-Canadian solution would ultimately be the best solution.”
British Columbia will probably not be able to deliver a major reform to its population in 2010, as promised, said B.C. Finance Minister Colin Hansen. But developing a national rescue plan is worth the wait.
“I think the original 2010 timeline would now be optimistic,” he said in Whitehorse. “We’re willing to work to engage other provinces and build that pan-Canadian solution, so we’re better to take that extra time.”
No option was taken off the table. However, ministers did define the retirement income issue as one that mainly involves only the middle class. That’s a distinction that won’t sit well with labour groups who feel low-income seniors are increasingly at risk.
The choices for reform include:
– forming a national, voluntary supplement to the CPP, an option favoured by the Alberta, British Columbia, the federal Liberals and some key pension experts.
– regulatory reform to give financial services firms more leeway to set up group savings plans, an approach frequently mentioned although not endorsed by the federal government.
– expanding the CPP by increasing premiums but also increasing benefits, an approach pushed by labour and seniors groups, as well as the federal NDP.
– the status quo, complemented by more intense efforts to educate the public about the savings vehicles available to them.
Experts, labour groups and some of the provinces have been sounding the alarm on the fraying of Canada’s pension system. They say the recent financial crisis exposed weaknesses in the system, and the aging of the population will only exacerbate the pitfalls.
More and more people are left uncovered by corporate pension plans, they say. Those who are covered have plans that are less and less generous. And those with no plans often fail to save on their own.
The dynamics threaten seniors’ standard of living, they say.
But a key experts’ report prepared at the behest of the provincial and federal finance ministers finds that retirement income is in pretty good shape in Canada.
“The first conclusion from the research is that Canadians are, by and large, doing relatively well in ensuring that they have adequate savings for their retirement,” said the report overseen by economist Jack Mintz of the University of Calgary.
Some groups of Canadians are not saving enough, but there’s not much research on who or why, he concluded.
A second report prepared for the Whitehorse meeting by pension expert Bob Baldwin for the Ontario government was somewhat more alarmist.
It concluded that Canada’s retirement system has been working well, but the future is dimmer.
It said keeping the status quo would seriously hurt the standard of living of some significant groups of people: immigrants, single people depending on the federal government’s Guaranteed Income Supplement, and seniors with dependents.
– With files from Jason Unrau at the Whitehorse Star.