This brief by Keith Ambachtsheer sets out his up-to-date views on the pension reform derby, a month before the Finance Ministers next meet on this topic in Alberta.
There is now wide consensus that the primary target of pension reform should be the millions of Canadian middle-income, private sector workers who do not have an employer-sponsored Registered Pension Plan. Many in this group face the risk of suffering material declines in their living standards when they retire. Two lead reform horses have emerged to address this looming problem:
1. Expand the CPP/QPP through raising the YMPE (currently $47,200), or raising the
income replacement rate (currently 25%), or some combination of the two.
2. Expand supplementary pensions through a viable strategy that will enroll the target group into one or more cost-effective pension plans or retirement savings accumulation arrangements that would sit on top of the current public OAS/GIS/CPP/QPP pension mix
So which pension reform horse should Canadians ride to victory? Is it enlightened CPP/QPP enhancement? Or is it a sound strategy leading to much wider participation in one or more well-managed, low-cost pension arrangements that supplement Canada’s current public OAS/ GIS/CPP/QPP structure?
Ambachtsheer says either strategy, properly designed and implemented, could propel Canada from its current 5th place ranking (according to the Melbourne Mercer Global Pension Index) in the global pension excellence derby to #1. But we must choose. Trying to ride both reform horses to victory would be a losing proposition for all Canadians. READ MORE