Old arguments against pension reform are incorrect and outdated. CanAge is grateful that a small change was made during budget 2019, which made a difference for a small slice of pensioners. However, the underlying problem remains.
Most of the rationale for not fixing the problem is based on three outdated and unsupported arguments.
First, the adoption of superpriority of pensions and pension protections will mean fewer employees will start up defined benefit plans. With respect, that ship has already sailed. Defined benefit plans are not being created. In Ontario, DB plans fell by more than 10% between 2017 and 2019, even after the Ontario government lowered funding requirements for solvency from 100% to 85%. The only changes that happened were that there are fewer DB plans, not more, and corporations saved billions.
Second, corporations with DB pension plans will have loan rate premiums that will make them uncompetitive and lead to more insolvencies. If profound pension deficits were such a key concern, corporations, pursuant to good risk management and corporate governance, would never permit these enormous pension deficits to occur on their books.
The third argument is that superpriority can have the side effect of making it harder for companies to pull up out of insolvency. This is simply not the case. Companies have the financial ability to fund pension requirements, but instead choose to use their cash for bonuses to corporate executives, dividends and share buybacks. Corporations do not have the legal requirement to protect pensions, so they don't.
The financial security of seniors matters. Seniors who are stripped of their pensions must rely on government benefits, which are not enough to make ends meet. They draw down hard on our already stretched systems, and any additional private savings they might have are in a slump due to flat interest rates—all of this in a rapidly aging population where one in five Canadians will be at the age of retirement by 2030.
CanAge has five recommendations in support of this bill and pension reform, which are to create a superpriority for defined benefit pensioners in the case of corporate insolvency; create pension benefit guaranteed funds across Canada; require pension funds to be fully funded, 100%; establish a retroactive and recurring refundable tax credit equal to what those who have lost have experienced; and finally, create a flexible and modern pension reform system.
We respectfully ask the committee to carefully consider our recommendations and review “Voices of Canada's Seniors: A Roadmap to an Age-Inclusive Canada”, which can be found on our website, canage.ca/voices. For detailed recommendations, specifically look under section E, regarding economic security.
We thank the committee for the opportunity to present today. It is respectfully submitted. Thank you.