Gerard Kennedy

Liberals demand government action on pension reforms

OTTAWA – Liberal Leader Michael Ignatieff today called on the Harper government to act on pension reforms that would help more Canadians to save for retirement and protect those who have lost pension income through bankruptcy.

“The Harper government has done little to safeguard the future for pensioners,” said Mr. Ignatieff. “The time is now for the government to step up and make saving for retirement easier and more secure for all Canadians.”

Liberal Seniors & Pensions Critic Judy Sgro, Finance Critic John McCallum and Senator Art Eggleton joined Mr. Ignatieff to present three pension reforms that need greater consideration from the Harper government:

• A Supplementary Canada Pension Plan (SCPP) to help Canadians save more

• Giving employees with stranded pensions following bankruptcy the option of growing their pension assets through the Canada Pension Plan

• Protecting vulnerable Canadians on long-term disability by giving them preferred status as creditors in case of bankruptcy

“Not enough Canadians are saving for retirement – which is why we need a hassle-free, safe and reliable way to save more,” said Mr. McCallum. “The Harper government should work with the provinces, pensioners, labour groups and the private sector to develop and implement an SCPP, which would allow Canadians to voluntarily invest extra funds in our trusted national pension.”

Supported by several provinces and pension experts, a national SCPP is one possible solution to the problem of low retirement savings. By providing an easy way for Canadians to put their extra savings towards future retirement income, an SCPP should be considered as part of reforms to the income security system that include Old Age Security and the Guaranteed Income Supplement.

“How many more Canadians whose companies have gone bankrupt have to see their pension savings evaporate before the Harper government acts?” asked Ms. Sgro. “We’re demanding that the Harper government give employees with stranded pensions the option of growing their pension assets through the Canada Pension Plan.”

This voluntary option would guarantee pension principal and ensure pensions aren’t locked in when businesses go bankrupt and market conditions are at their worst, protecting them from future market turmoil.

“Many Canadians on long-term disability lost everything when their employers went bankrupt,” said Senator Eggleton. “That’s why I plan to introduce a bill in the Senate that would, if passed, give the most vulnerable on long-term disability preferred status as creditors.”

Backgrounder
Calls for government action on pension reform

Pension Facts

For a variety of reasons, Canadians aren’t saving enough for their retirement. The Harper government has to do more to encourage Canadians to save more.

One third of Canadians have have no retirement savings beyond what is offered through the Canada Pension Plan (CPP), Old Age Security and the Guaranteed Income Supplement, while another third don’t have enough retirement savings to maintain their current standard of living.

Over half of Canadian families do not belong to an employer sponsored pension plan. While the CPP covers 93% of workers, it is not is not sufficient on its own.
According to Statistics Canada, the $32.4 billion in RRSP contributions in 2006 represented only 7% of the total room available to eligible tax filers. Almost $500 billion of accumulated RRSP room remains unused.

Supplementary Canada Pension Plan

The Premiers of Alberta, BC, and Saskatchewan have all called on the federal government to create a Supplementary Canada Pension Plan (SCPP). They have also said that if the federal government does not allow this option soon, they will create their own.

Liberals are calling on the Harper government to work with the provinces, seniors, labour groups and the private sector to implement an SCPP as one possible solution to the problem of low retirement savings. An SCPP would provide an easy way for Canadians to put their extra savings towards future retirement income, and should be considered in reforms to the income security system alongside Old Age Security and the Guaranteed Income Supplement.

Here’s what some Canadians are saying about the SCPP:

“We’ve got to get on with this… If they’re not ready to move, we’ll be moving in 2010 to try and make sure this gets in place as quickly as possible.” – British Columbia Premier Gordon Campbell

“I don’t want to be pushy here, but I really believe it’s time for movement forward.” – Alberta Finance Minister Iris Evans

“Creating the CSPP is the logical next step for Canada as it strives to build the best retirement income system in the world.” – Keith Ambachtsheer, Rotman International Centre for Pension Management at the University of Toronto

“RRSPs have less than optimal participation rates, attract relatively high administrative and investment fees and place the burden of making investment decisions on individuals – many of whom readily acknowledge their lack of expertise in this regard.” – David Denison, President and CEO of the Canada Pension Plan Investment Board

Rolling Underfunded Pension Plans into the CPP

The second initiative the Liberals are calling on the government to implement is designed to keep Canadians’ pensions secure. Currently, if a pension plan’s sponsor goes bankrupt, the assets in the pension fund must be converted into annuities. This often occurs when markets have declined sharply, which means that pensioners see a drastic reduction in the value of their pensions. The government should take the necessary steps to give pension plan beneficiaries the option to pool their plan with the CPP so that their savings can be managed for growth.

Bankruptcy and Insolvency Act Amendments for Self-Funded Long-Term Disability Plans

The third measure the government needs to take action on is aimed at protecting some of Canada’s most vulnerable pensioners – those on long-term disability. Today, if a company with self-funded long-term disability benefits goes bankrupt, employees dependent on these disability benefits stand to lose everything. This is the dire situation currently facing some 400 Nortel workers. We are calling on the government to protect the most vulnerable by agreeing to amend the Bankruptcy and Insolvency Act to move those on self-funded long-term disability benefit plans up to the status of preferred creditor in the case of bankruptcy. The Liberal Party will be introducing a bill to this end in the Senate shortly.

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