Good afternoon.
My name is Jean-Pierre Laporte. I'm a lawyer practising exclusively in the field of pensions and benefits in the city of Toronto. I have been actively involved in pension reform issues since 2003 and have published a number of articles in this area. Some of you may be familiar with one particular policy idea I first proposed in 2004 calling for the creation of a supplemental Canada pension plan. That solution was meant to deal with the issue of inadequate pension coverage in Canada in the private sector. I would be happy to discuss this concept during the question period.
The Standing Committee on the Status of Women has received my testimony as part of its study on women and pensions, and I would direct you to that comprehensive House of Commons study and its reports for additional background information.
My goal today, however, is to present this committee with some information on pension adequacy from an international perspective. While I realize that some of the speakers you have invited will present on this topic at later sessions, in my view the committee would benefit from beginning its study by looking at the international arena before becoming too bogged down in Canadian or provincial details. International comparisons provide a useful benchmark to gauge the performance of our own system, and they highlight design features that differentiate us from our peer nations.
I think it's fair to say that the fundamental question that most decision-makers should ask themselves is simple: do Canadians have enough to live on in old age? But who are we talking about? The self-employed individual, federal civil servants, farmers, homemakers, the recently arrived immigrant? Depending on the category one looks at, our fundamental question generates different answers, and yet there is still some merit in asking the global question: do Canadians as a whole have enough to retire on?
This brings me to very high-level international statistics that have been collected by the OECD and that I have distributed to the members of this committee. As you all know, the Organization for Economic Cooperation and Development tries to provide standardized statistical information to enable useful international comparisons. I'm no statistician and I cannot verify the accuracy of the data provided by this organization, but like most Canadians, I surmise that someone more qualified than me has taken the time to ensure that these statistics are of some utility and may be relied upon to some extent.
So what does the OECD tell us about Canada's ability to provide financial support for its senior citizens once they leave the workforce? The key statistic that I think is important and that I want to bring to your attention today is the net income replacement ratio provided by pension plans for someone earning the average industrial wage in their home country. That information is available on the OECD website, and I can provide that information to the clerk of the committee, but I think it's in the materials that I've provided.
By way of disclaimer, while the OECD data set in question has information about all the OECD members, I've only extracted data for the top 14 countries, with the highest net replacement ratios. This is 2006 data, the most recent data that I found available on the website.
When we look at the ranking, the Netherlands rank number one at 103% of pre-retirement income and Canada is ranked number 12 at 57.86%. There are a number of countries in between that have fairly high ratios: Denmark, 91%; Austria, 90%; Italy, 74%; and so forth.
This bird's eye view that looks at how much pre-retirement income is replaced by pension sources is interesting in many respects. First of all, it puts into perspective the claims some have made that our pension system is a world leader and there's no real need to reform anything. When all the rhetoric is said and done, the numbers don't lie.
Secondly, on an aggregate level it demonstrates that we have quite a bit of work to accomplish if we want as a nation to provide the kind of income replacement ratios that some smaller economies have already been able to achieve.
What the statistic doesn't tell us is whether Canadians are replacing enough income to live well into old age. Nor does it tell us who is covered and who isn't. Nor does it provide any detail as to whether the national pension system in the country is sustainable or affordable. What it does do, though, is provide a rough idea of how successful we have been as a nation in providing post-retirement income to those citizens of ours who earn the average industrial wage.
My own assessment is that while some of us have excellent pension plans and can look to the future with a lot of confidence, the millions of Canadians with no pension savings or inadequate financial resources are dragging our national average down, and that there is much work to be done.
Thank you for your invitation to Ottawa.