Thank you and good afternoon. I would like to thank the chair and members of the committee for the opportunity to provide our perspectives on Canada’s retirement savings system.
With me today is my colleague Marion Wrobel, the CBA's director of market and regulatory developments. We also have for you an additional copy of a report we sent to you last November on this issue, which includes new research we have undertaken on the household savings of Canadians.
The CBA shares the concerns about the adequacy of Canadians' retirement savings. As providers of savings retirement vehicles, sponsors of defined benefit pension plans, and providers of advice to Canadians throughout their financial life cycles, our members have been actively exploring ways to strengthen Canada's retirement savings systems. We've put some of those ideas into the report that we've brought forward to you today.
I want to make four key points today.
First, as to how and why Canadian families save, there are many varied aspects, and these change over the course of a family's life cycle. When looking at this issue, there's sometimes a tendency to focus exclusively on pension or registered plan participation as the only measure of financial security, whereas there are in fact a range of ways that Canadians prepare for retirement. Our concern is that a one-size-fits-all approach may not be effective in addressing the actual savings needs of Canadians. In fact, it could have unintended consequences, for instance, by simply shifting existing savings from one pot to another without actually increasing savings, which has to be the goal.
Second, there are a number of concerns that we feel policy-makers would need to very carefully consider before embarking on any new public plan. For instance, some have suggested the creation of a new supplemental defined contribution plan. Some questions had occurred to us about that, which we think need to be addressed. For instance, how would Canadians get advice on the investment decisions they would have to make when contributing to a public supplemental plan? As we've just heard, Canadians have very clear expectations about the Canada Pension Plan. It's a defined benefit plan. It has known payouts at retirement. The issue is then who would address the expectations and potential confusion among Canadians regarding the unknown future payouts of a new government-created defined contribution plan? What would a new plan do to the incentives for private sector employers to establish or even retain their own pension plans for employees? It's questions like those that need to be very carefully considered as we all go through this process.
The third point I want to raise is that we believe the current retirement savings system in Canada is not broken. It's quite the opposite. It is a strong and functioning system, but it is in need of improvements. If our collective goal is to strengthen the financial security of Canadians, it may be more effective for governments in Canada to work together to improve the tax-assisted system that we already have, rather than creating a new public plan that would duplicate infrastructure already in place.
In our report, which we've provided to you, we make a number of recommendations that would make our already good retirement savings system even better. For example, in our view, the law should allow for pension plans that are de-linked from the employment relationship to allow for plans to be open to a wider range of membership. Such plans could offer small businesses effective alternatives to setting up their own plans and could also be available to self-employed individuals so that more people could participate in pension plans and save.
In addition, the rules regarding the tax-assisted private savings system should also be improved, for instance, by creating a lifetime ceiling on tax-free retirement savings instead of annual limits. By the way, in terms of the tax-assisted savings system, we need look no further than the tax-free savings account as an example of how a well-designed tax-assisted vehicle can be both popular and effective in helping Canadians save.
In terms of steps that we all still need to take, there's also the question of the need for enhanced financial literacy as it relates to savings and retirement planning. We certainly support the government's efforts through the financial literacy task force.
The fourth and final point I'd like to make is that the adequacy of retirement savings is a national issue and requires national public policy solutions. In financial policy matters generally and in retirement savings matters specifically, in our view, fragmentation across the country will ultimately hurt rather than help Canadians.
I look forward to your questions. Thank you very much.