Pension Pulse

Jack Mintz, Palmer Chair in Public Policy at the University of Calgary, wrote an op-ed for the National Post, Affluent Canadians don’t need more government help in providing security for their old age : With the federal-provincial-territorial Ministers of Finance meeting coming up in December, the semi-annual build-up for CPP reform comes to a head. The latest is a proposal by Prince Edward Island to expand the CPP for “modest” income recipients. Although it is not easy to find a public version of the PEI proposal, my understanding is it would double the pensionable earnings limit, increase the replacement rate from 25% to 40% for incomes between $26,000 and $52,000 and bring in a new replacement rate of 15% for earnings between $52,000 and $104,000. Employer and employee payroll taxes jump to 3.1% of earnings over the $26,000 threshold. And to make the benefits fully funded, the benefits are increased over time so that the young are not paying for new benefits paid to an ol...

Vanessa Lu of the Toronto Star reports, Canada Post faces $1B pension shortfall : Canada Post warns it will need a significant cash infusion by the middle of next year to meet pension payment obligations estimated at $1 billion. “Based on our current financial projections, we believe we are going to require additional liquidity by mid-next year,” said Canada Post spokesman Jon Hamilton. “We’re talking to the shareholder, the government, about options to address the challenge.” Hamilton had no specifics about what that might entail, whether it would be increased borrowing or a subsidy, though Hamilton said Canadians have made it clear they don’t support such government subsidy. The warning about a cash shortfall was tucked inside the corporation’s third quarter earnings, which were released Thursday. The Canada Post segment lost $129 million, before tax, in the third quarter, an improvement from last year’s $161 million, in the same period. The improvement was attributed to...

Julian Beltrame of the Canadian Press reports, OECD warns pension safety net fraying as poverty among seniors rises in Canada : An international think-tank warns that poverty among Canadian seniors is on the rise and that current pension safety nets may be inadequate to address the problem. For instance, as poverty rates were falling in many OECD countries between 2007 and 2010, in Canada they rose about two percentage points. As well, the report notes that public (government) transfers to seniors in Canada account for less than 39% of the gross income of Canadian seniors, compared with the OECD average of 59%, meaning more Canadians depend on workplace pensions to bridge the gap. Meanwhile, public spending on pensions in Canada represents 4.5% of the country’s economic output, compared with and OECD average of 7.8%. Canadian seniors depend on income from private pensions and other capital for about 42% of their total. “As private pensions are mainly concentrated ...

Jeffrey MacIntosh, Toronto Stock Exchange Professor of Capital Markets, Faculty of Law, University of Toronto, and author of C.D. Howe Institute’s “ High Frequency Traders: Angels or Devils ?” wrote a special for the National Post, In praise of high frequency traders : On Thursday, the Investment Industry Regulatory Organization of Canada (IIROC) is scheduled to release its much-awaited study on high frequency traders. The standard image of the high frequency trader (HF trader) is that of a slavering troll working assiduously to destabilize world stock markets and laughing gleefully while prying gold fillings out of retail traders’ mouths. In the minds of many, HF traders caused or greatly contributed to the infamous U.S. “Flash Crash” of May 2010, when the Dow Jones plunged (and then recovered) 1000 points (roughly 9%) in a matter of minutes. HF traders also stand accused of increasing trading costs for both retail and institutional traders. Academic evidence, however, su...

Michael Mackenzie of the Financial Times reports, Bubble fears as US stocks break records : Markets have left milestones for dust. US stock prices are enjoying their best year since 1997, with investors apparently untroubled by the backdrop of a lacklustre economy and high unemployment. The S&P 500 has barrelled through three century marks this year alone, from below 1,500 to this week’s intraday peak of 1,802 for a year-to-date gain of 25 per cent. The Dow Jones Industrial Average has finally breached the 16,000 threshold, after rising through 15,000 in October, while the Nasdaq Composite is looking to revisit 4,000 after an absence of 13 years since the dotcom bust of 2000. As the Fed’s balance sheet approaches $4tn, its expansion in recent years neatly matches the rise in the S&P 500, creating unease that an equity bubble is surely inflating as was the case in 2007 and 1999. Not so according to Janet Yellen, Federal Reserve chair-designate, who told Congress last ...

The Canadian Press reports, New Brunswick to introduce changes to public sector pension plans : New Brunswick’s finance minister says the provincial government has gained the support of the majority of unions that represent the civil service in its proposed public pension changes. Blaine Higgs says he has signed a memorandum of understanding with unions that represent two-thirds of the bargaining positions within the public sector for pension legislation the government will introduce later today. He says the unions include those that represent nurses, hospital workers and court stenographers. The government wants to implement changes including moving to a shared-risk model for pensions in order to address a $1-billion deficit for the public service plan. The provincial wing of the Canadian Union of Public Employees has expressed concerns over the changes, saying while they may work for some unionized workers, they don’t for others who have defined benefit plans. And CTV A...