Thank you, Mr. Chair.
My name is Scott Perkin and I am president of the Association of Canadian Pension Management. With me today is Bryan Hocking, the CEO of ACPM.
The ACPM is the voice of pension plan sponsors, plan administrators, and their allied service providers. Our current membership represents some 300 registered pension plans providing coverage for over three million Canadians. For over 30 years the ACPM has been advocating for the growth and health of the Canadian retirement income system.
Pension headlines are everywhere of late, and Canadians could be forgiven for thinking that a crisis exists. Yes, there are significant challenges, and they do require thoughtful solutions, but the good news is that there are solutions.
We believe that every Canadian should have an adequate retirement income. Achieving this will require a pan-Canadian approach wherein both the federal and provincial governments develop common solutions that will work for all Canadians. Solutions must recognize that opportunities for Canadians to obtain adequate retirement income should not rely on where they live or whether their job is in the public or private sector. Governments working together can make this happen.
Canada has one of the best retirement income systems in the world, according to the 2009 Mercer Global Pension Index. Government programs, that is, the OAS and GIS as well as the CPP and QPP, and the first and second pillars of Canada's three-pillar system are doing their job of providing a basic level of retirement income for all Canadians. Recent studies commissioned by the federal and Ontario governments confirm that the system is sound and that the problem of retirement income adequacy is a targeted one, wherein some Canadians are not able to save enough and others would like the chance to save more or to participate in a pension plan.
The question is, how do we increase the number of Canadians who have an adequate retirement income?
As the voice of plan sponsors and others that provide retirement income plans for Canadians, we believe that the third pillar, workplace plans and personal savings, can provide a much greater range of options for an adequate retirement income, with the right policy and regulatory environment. This flexibility could also provide a more precise response to the savings needs of those Canadians who are not saving enough for retirement.
Workplace plans and personal savings have an important role to play, and yet we know that many employers are reluctant to begin or continue providing retirement income options for employees, especially defined benefit plans, because of increased costs, complexity, and significant policy barriers. We need more employers to offer more retirement options, but current rules discourage new workplace plans and frustrate existing arrangements. Fragmentation and different rules across the country further limit the retirement income system's effectiveness. In addition, a couple of myths threaten to shut down discussion of these third-pillar options in favour of simply extending or supplementing the CPP as some sort of overall solution.
One myth is that expanding the current CPP is the better way to go because it is universal in its application, but the recent studies I cited make it clear that there is not a universal problem. Therefore, a one-size-fits-all solution, with its higher payroll tax and inflexible mandatory contributions, is not what Canadians need, especially when there are better ways to prepare for retirement for many Canadians.
Others hold the view that a supplemental CPP is the better option because it is cheaper, but all retirement income programs have costs of running them, whether in the public or private sector. The question is, what level of services are these programs expected to provide, and what is the value of those services to plan participants?
Third pillar retirement income providers offer expertise in a complex area and more options in terms of savings vehicles that can provide more flexibility at different phases of life. For example, an individual raising young children and paying down a mortgage may need different savings options than later in life when their mortgage is paid off and their children are grown. In addition, third pillar retirement income providers do offer economies of scale and competition, which drive efficiency, choice, and options for consumers.
The bottom line is that every Canadian should have an adequate retirement income. Our CPP and QPP and other government plans provide the foundation, but they cannot provide the only option. We believe that several large plans operating multi-jurisdictionally can provide the flexibility and choice of savings options that Canadians need, while encouraging diversification of capital and retirement savings, economies of scale, and the benefits of competition, such as lower costs.
Changes to the Income Tax Act and provincial pension standards could support this. They could also expand coverage opportunities for the self-employed; remove barriers to expanded enrollment in workplace plans, particularly for small business; and enhance individual options. These changes would support increased competition and diversification of retirement savings, while providing more flexibility and choice for Canadians. A thriving retirement income industry would also support economic growth in terms of jobs and investment for Canadians.
There is no question that we face considerable challenges, but there is also no question that a range of options is what is needed to meet the retirement income needs of Canadians. There is no single solution here.
The time is ripe to shape needed reforms to enhance the third pillar of Canada's retirement income system and to develop a range of options that will work for all Canadians and achieve our collective goal: more coverage for more Canadians.
Demographics are not on our side. There's no time to lose.
Thank you.