Electoral Backlash Over Pension Reform?

Norma Greenaway of the National Post reports, Electoral backlash threatened over pension reform:

Federal and provincial governments will pay a political price if they fail to turn a vague commitment made in December to pursue pension reform into a concrete plan to bolster Canadians' retirement savings, reform advocates are warning.

The Canadian Labour Congress and the leading advocacy group for seniors, known as CARP, vow no-holds-barred campaigns to persuade the Harper government to commit to pension reform in its March throne speech and to keep provincial governments on the case.

They say Finance Minister Jim Flaherty and his provincial counterparts cannot keep getting away with calling for more study on reform options and public consultation, as they did after their meeting in Whitehorse in December.

"That is a technique of governments that don't want to make any changes," said Susan Eng, CARP's pension specialist. "They wear people out with low-level consultations, asking you questions that they have already answered."

Canadians are ahead of the politicians on this issue and they are ready to get down to "brass tacks" on the design of a plan to fatten retirement nest eggs, she said.

Federal and provincial officials have not yet decided what shape the public consultations will take or who will do the research, a federal official said.

But they are facing a spring deadline. Mr. Flaherty told reporters in Whitehorse the ministers "will look at specific recommendations concerning the options" at their next meeting in May.

Following the Whitehorse talks, British Columbia and Alberta said they were putting on hold plans to go it alone with supplementary pension schemes.

Ken Georgetti, president of the Canadian Labour Congress, said he was disappointed by the noncommittal nature of the Whitehorse outcome, but was heartened pension reform is still on the table.

"They didn't shut it down and that leaves us some hope," he said.

The congress has made pension reform its top priority for 2010 and Mr. Georgetti said he views Prime Minister Stephen Harper's decision to suspend Parliament until March as a bit of a bonus.

"It gives us more chance to work on this issue because we're not distracted by what the government is doing in Ottawa," he said. "Our staff is working full time on this."

Mr. Georgetti predicts pension reform would be a major issue in all future federal and provincial elections, and says politicians would be foolish to ignore calls for help, many of them coming from aging Canadians concerned about how their children and grandchildren will save enough money to finance a decent retirement.

"The grey hair vote is a very important vote," Mr. Georgetti said.

Ms. Eng said older Canadians are stepping up to the lobbying plate even though they know they stand to gain little, if anything, from reforms being discussed.

"The people in our group are already retired. Their goose is cooked," Ms. Eng said. "Really, what they are saying is ‘take the benefit of our advice.' "

The advice? Create a new and attractive savings track for Canadians who do not have workplace pensions -- a benefit that is becoming increasingly rare.

About two-thirds of private-sector workers are without workplace pensions, and the number of employers offering such plans has been shrinking by the year. A 2007 study by the Canadian Institute of Actuaries also said only about one-third of Canadian households were saving at levels capable of generating sufficient income to cover non-discretionary expenses in retirement.

Mr. Georgetti said reforms should focus on future retirees.

"We should start putting in place now an adequate system of retirement savings so that the younger generation will not find themselves in the position that older workers find themselves today."

The Canadian Labour Congress calls for a gradual doubling of Canada Pension Plan contributions over seven years to double the maximum CPP benefit to almost $22,000 a year.

CARP advocates a mandatory supplementary pension plan separate from the CPP that would allow employers and employees to build an even better retirement income.

Ms. Eng said, however, her group would support the Canadian Labour Congress proposal as a first step toward a broader reform.

Mr. Georgetti says he's convinced the congress proposal, which is strongly opposed by banks and financial firms that sell tax-assisted savings vehicles, will win broad public support.

"It's the cheapest of all the options, it's the most effective, it's indexed and it's portable," he said.

In response to CARP's request, Terence Corcoran of the National Post wrote an article, Stop the music! CARP speaks. I quote:

In her statement yesterday, Ms. Eng provided CARP’s rationale for what is called a new “Universal Pension Plan” to be introduced by Ottawa and/or the provinces. “Not only is there real public pressure for pension reform to re-balance the interests of employers and employees but there is now general realization that 11 million Canadian workers don’t even have pensions to worry about, that one in three Canadian workers retire without any retirement savings. And the thousands of people who thought they had safe pensions now see that their retirement dreams may never be realized.”

This is language — 11 million Canadians don’t have pensions, one in three workers without “any savings” — that drives CARP membership up and sounds good in Classical FM radio clips, but the numbers are bogus misrepresentations of the Canadian pension system. The Ontario NDP claim that Canada has a retirement crisis in which “six out of 10 people” have no retirement plan is just as preposterous.

According to Ms. Eng, retired Canadians want “real action.” There is, she said, a “growing consensus” for a new national retirement savings vehicle that would add another national pension system, a “universally accessible, affordable saving vehicle,” on top of the existing Canada Pension Plan and Old Age Securitiy system.

The implication is that the vast majority of Canadians are heading into retirement nightmares and need to be bailed out by another government income redistribution system — an implication that is not borne out by a half dozen studies recently commissioned by Ottawa.

In a recent report on the studies assembled by Jack Mintz of the School of Public Policy at the University of Calgary on behalf of Finance Canada, the Canadian pension system looked far from being a nightmare. The studies found Canada’s pension system to rank well above the OECD average in terms of providing income security and replacement for the vast majority of Canadians. There are certainly gaps, although exactly where those gaps are remains an unresolved issue.

CARP and other advocates of a new wave of government pension intervention are big on exaggeration and rhetoric. So far, at least, Ottawa and most of the provinces are holding off, promising only to look at the issue again in the future. Maybe with facts to work with, needed pension reform could more usefully proceed.

For a smart guy, Mr. Corcoran just wrote a superficial article. Instead of critically analyzing the facts concerning the crisis in the making, he accepts Jack Mintz's report as the gospel on pension reform. This is sloppy reporting from someone who should know better.

And I'm not advocating that we blindly accept CARP's position without questioning the costs. We need to examine all policies and the costs to society. Some very tough choices lie ahead, requiring compromises from all stakeholders.

But to get the pension agenda moving again, our politicians need to get back to Ottawa and back to work. Proroguing Parliament at a time when more and more Canadians are feeling anxious about their future could backfire in a spectacular fashion and lead to even more political uncertainty. This is an outcome that Canadians can live without.

***UPDATE: CARP's Susan Eng responds***

Susan Eng, Vice-President, Advocacy, at CARP sent this response to the National Post to Terence Corcoran's article:

Mr. Corcoran argues that there is no need to fix Canada’s pension system. Leaving aside his opinion about the messengers who call for change – including one of Canada’s premier business schools with whom CARP is proud to keep company - the essence of his argument is that the experts engaged by the federal government think that Canada’s pension system does well enough for most.

But what would he propose for the rest? Even his Mintz report identified a significant number of people who are not saving enough. Anyone retiring without savings or a workplace pension is expected to live on $16,000 to $19,000 consisting of OAS and CPP/QPP topped up by GIS. That is fact, not rhetoric.

CARP members who overwhelmingly support our position that the retirement system needs fixing are themselves already retired. Any reform will not benefit them but they are offering their advice based upon their own experience and judgement. These people watched their voluntary investment in RRSPs evaporate in this market crisis. The thousands who rallied on Parliament Hill face certain calamity since their bankrupt companies cannot meet their pension deficiency obligations. These too are facts.

So when Mr. Corcoran’s experts tell older Canadians facing retirement that there’s nothing to worry about – they may as well ask instead: “Who are you going to believe – me or your own two eyes?”