Canada Pension Plan

Pensions must be expanded: expert

The Leader-Post (Regina)

Thu Apr 21 2011

Page: B1 / Front

Section: Business & Agriculture

Byline: Neil Scott

Expansion of the Canada Pension Plan is the best way to solve the looming problem of providing good retirement income for Canadians, according to a featured speaker at a pension conference in Regina.

Sylvain Schetagne, a senior economist with the Canadian Labour Congress, said many workers are facing an uncertain future, as they try to cobble together enough income from government pension plans, company pension plans and personal savings to retire in comfort.

Expansion of the existing Canada Pension benefits, so the benefits would ultimately double, is the best solution, Schetagne said.

"It's something that works; why not expand it?" Schetagne asked.

He made his comment in an interview Wednesday, prior to participating in a panel discussion today at a regional pensions and benefits conference being held by the Canadian Benefits & Pensions Institute, at the Hotel Saskatchewan Radisson Plaza.

Another possible solution to retirement problems would be improving the company pension plans that are available to some but not all Canadian workers.

But Schetagne said there are problems with company pension plans, including that about two thirds of Canadian workers aren't covered by a company plan.

Schetagne said an increasing trend has been for many pension plans to be "defined contribution" - plans where both the employer and employees contribute a set amount to the plan on a regular basis.

But Schetagne said there is a problem with defined contribution plans because the amount of money received is not guaranteed, with the amount varying depending on the return received on the invested money.

The retirement nest eggs of many Canadians were sharply reduced about two years ago when the recession hit and stock markets tumbled. While the markets have substantially recovered, Schetagne said the risk will always exist that drops in the stock markets and other financial markets could wreck the retirements of many Canadians involved in defined contribution plans.

The other main type of pension plan is the defined benefits plan, which gives workers a guaranteed amount of monthly pension, usually based on how many years they worked and how much money they made while they were working.

But many defined benefit plans have been facing problems in having enough money, long-term, to pay all the pensions that have been promised.

Schetagne said many employers are becoming increasingly reluctant to offer defined benefit plans because of liability issues they could face in providing the promised pensions if the pension plan doesn't have enough money.

There is also a potential problem for workers, to the extent that a guaranteed pension might not be so guaranteed if the pension plan goes broke.

The best solution for resolving those issues would be to expand the Canada Pension Plan, Schetagne said.

While the existing Canada Pension Plan pays a pension of up to 25 per cent of a worker's earnings when they are working, a doubling of the benefit could increase the benefit to 50 per cent.

That increase could be accomplished by increasing both employer and employee contributions to the Canada Pension Plan from 4.95 per cent each to 7.95 per cent each, Schetagne said.

Those increase premiums could be phased in over several years, to help ease the burden for workers and employees, he said.