Thank you very much for the invitation today.
I have some slides. Some of them will be information or data that are familiar to some people, but I think it's worth reviewing them, and then I'll come to my conclusions. I'll try to be as brief as possible for the committee.
There are four things I want to talk about: first, whether there in fact is a pension crisis; secondly, the failure by many pension researchers in the academic community to include home equity as a savings towards pensions; third, the minimum pensionable age; and fourth, a failure to produce a level playing field between the private and public sectors.
I will disclose that I don't consult to any organization anywhere, directly or indirectly, not to unions, to governments, to corporations, and I have no investments, direct or indirect. I'm a tenured professor, so I can't be fired. I speak truth to power. I'm a rare, rare Canadian: I have a job for life--well, senators and tenured academics.
I'll start with the first slide up there. That's the OECD slide, from their massive comparative pension study, showing that Canadian elders, defined as people over the age of 65, are the third wealthiest on the planet earth in terms of their annual income.
The second slide shows the poverty rates among elders. We have the second-lowest poverty in the world among people over 65. The poverty rates for young people are much higher than for our elders.
A third comparative slide that is very useful to examine is the OECD pension spending across the OECD. We're one of the lowest, which I interpret as very good news. There are an awful lot of problems in the European Union, as we know; Greece is essentially insolvent. And underlying a lot of the problems in Europe are unsustainable and extraordinarily generous pension plans.
I'm jumping now to the home ownership data. Approximately 68% of Canadians own their own homes, which is one of the highest figures in the world. Many Canadian pension studies--and I'm referring to scholarly pension studies--simply ignore or deny the reality of home equity. Yet a much larger percentage of Canadians have homes than have RRSPs. Far fewer Canadians invest in RRSPs. I think we can interpret this data to suggest that Canadians understand they can live in their homes throughout their lives, sell them at the end, and retire or downsize to smaller homes, as many do.
This is a metric from Scotiabank's “A Nation of Homeowners”. We, as Canadians, state by our investment choices that we prefer home ownership to financial savings, including pensions.
I'm trying to rebut the argument that there are a lot of people who are ignorant about pensions. I'm arguing that they understand they have to make trade-offs, and they choose home ownership over pensions in their twenties and thirties when they're starting out.
Committee members have these metrics, so I won't belabour them, but again, it's showing a very nice segmentation--age and debt. And as we know, as we get older we pay down our mortgage and we have more equity, more savings to finance our pensions, among other things.
Canadians' household net worth, after a brutal recession, is now $6 trillion, which is an extraordinary amount of savings. This raises the question, if we're not saving enough, how much is enough? This slide of the homeowner equity is showing that, as is personal savings as a percentage of balance sheets.
I picked this metric from Statistics Canada from 2006. I want to go to the second slide, and it shows, once again, that the single largest asset is not pension assets or savings or retirement RRSPs, but home ownership, again reflecting the choice of Canadians to buy homes before any other investment.
I'm very conscious of my time, so I'll push forward very quickly.
Bismarck established the world's first pension in 1870, as the chancellor of Germany. He was a very clever politician. He set the pension retirement age at approximately the age of life expectancy. You dropped dead about the time you were eligible to collect the pension, which was 65. Of course pensions were highly sustainable in Bismarck's Germany, if you had very few people collecting.
Now, of course, women live to age 83--that's Statistics Canada data--and men to age 78. We have to start at least talking about adjusting the minimum pension age to 70 to reflect the much longer lifespan. Why 70? Well, in the OECD, more precisely in Europe, a good number of countries have already increased the age to 67. The U.K. shifted to age 68 last year.
The former Congressional Budget Office director is strongly advocating 70, as are the former director of the currency, who did the video I.O.U.S.A., and Pete Peterson, author of Gray Dawn. Pension ages in the OECD are going up, according to OECD analysis.
Just finally, because I have only a few slides left, I really want to talk about pension unfairness. I'm sure you'll hear this from others, such as the CFIB. Although I am in the public sector--I am a tenured academic--I did work for ten years in the private sector in banking, and I have great sympathy for people in the private sector, many of whom have no pension, while we in the public sector have very generous pensions. This is unfair to those in the private sector.
There are things that can be done. Annual caps on retirement savings rules can be addressed. There should be restrictions on private large-pooled pensions. Savings for timed pension plans should be addressed. What we really should be aiming for as an overarching goal, a policy objective, is a common set of pension rules that are approximately equal between the public and the private sectors, with a common pensionable age of 70. I realize many of my colleagues--academics and friends of mine in the public sector--are not going to be happy with this recommendation. Also, we should be discussing, because of the problems with Nortel, looking at one possible option—and I hope this committee will—being a pension guarantee corporation similar to the one in the United States, which is working, apparently, quite well.
The point I want to finish up with is that if you as the committee and you as Parliament increase pensions to produce much more generous pensions, it is going to mean a diminution of moneys available to Canadians to buy their houses. There is a trade-off involved. It's all very fine to talk about creating a much more generous Canada pension or other pension systems that are mandatory, but it will represent a diminution of moneys available for home ownership, and that's the trade-off that has to be addressed.
Thank you very much.