CAAT Pension on Why Better Pensions Are Needed For a Better Canada
Toronto, November 30, 2023 – CAAT Pension Plan today released a white paper, titled Better Pensions Needed to Create a Better Canada, on current demographic trends and state of retirement preparedness that open opportunities for businesses to better retain and engage their workforce. Providing an employer perspective to retirement literacy research, the report highlights actionable recommendations to better attract and retain talent in an intensifying labour market.
The paper examines results from the Canadian Public Pension Leadership Council (CPPLC) survey report released in June 2023, The Pensions Canadians Want: Perceptions of Retirement (2016–2022), which compared changes in Canadians' views on retirement over the past six years. It traced how outlooks have declined, factoring environmental and economic drivers such as pandemic disruptions and rising inflation.
"After years of challenging economic conditions, many have been set back in their savings and are more stressed about their financial and retirement futures," said Derek Dobson, CEO and Plan Manager of CAAT Pension Plan. "The paper highlights the pivotal role employers play in improving retirement income security for Canadians where savings vehicles can have the most positive impact, which is in the workplace."
Key data:
- More than half of Canadians in Generation X (53%) are highly stressed about outliving their retirement savings, followed by younger workers of Millennials and Generation Z between ages 25 to 34 (49%).
- The majority of Canadians under 45 (55%) want an employer contribution match.
- Canadians across all age groups want retirement income that is guaranteed to last a lifetime (72%), inflation-adjusted (71%), and monthly and predictable (71%). The desire for the features increases as workers near retirement age.
Offering workplace pensions helps business performance
Organizations that offer lifetime retirement income plans can support the long-term financial wellness of employees and gain a competitive edge in attracting and retaining top-tiered talent. While the qualities of defined benefit pensions are most desirable, more than half of Canadians ages 18 to 24 (55%) would switch employers for any pension plan at all.
Improving access to pensions will benefit future generations
Retirees with adequate lifetime retirement income retain purchasing power and spend in their communities and at local businesses. The report captures the downstream benefits of retirement income security in Canada, based on previous CPPLC economic studies that connects every $10 in public pension benefit paid to $16.72 in generated economic benefit.
To read the study, please visit: www.caatpension.ca/CAAT/Assets/Documents/News/Announcements/CAAT_Report_Based_on_CPPLC_Data-November-2023.pdf
About CAAT Pension Plan:
Established in 1967, the CAAT Pension Plan is an independent, jointly governed plan that offers two highly desirable designs of a defined benefit pension. CAAT's award-winning DBplus plan design is leading an extraordinary pace of growth for the Plan. Originally created to support the Ontario college system, the CAAT Plan now proudly serves more than 360 participating employers in 17 industries including the for-profit, non-profit, and broader public sectors. It currently has more than 91,700 active and retired members. The CAAT Plan is respected for its pension and investment management expertise and focus on stability and benefit security. On January 1, 2023, the Plan was 124% funded on a going-concern basis.
Learn more at: www.caatpension.ca.
Take the time to read this white here, it is excellent and not too long (roughly 26 pages).
I want to thank Greg Hubert at CAAT for sending it over to me.
Below, the introduction and executive summary:
Here is the key passage for me:
Absent government-mandated participation in employer-sponsored retirement plans, pension plans and other retirement savings vehicles can only exist with the endorsement of employers. A successful workplace retirement plan must provide a strong business case for employers. Amid the historic generational turnover seen today, employer endorsement is earned by solving talent attraction, retention, productivity, and other workforce management challenges.
Modernizing the plan design for today’s business and workplace environment and providing education to employers about this tried-and-tested tool for long-term retention will improve outcomes for all participants ─ employers, members, and industry providers. Some solutions and recommendations cited are already in development at organizations, an important step and endorsement that workplace pensions serve as both a viable business and human solution.
Spot on, absent a government-mandated participation in employer-sponsored retirement plans, pensions plans and other retirement savings vehicles can only exist with the endorsement of an employer and it must be a win, win, win for all parties involved.
This is why CAAT's CEO and Plan Manager Derek Dobson and his team spend a lot of their time educating employers on the low cost and benefits of their pension solutions like DBplus.
The goal is to cover more Canadians that lack a pension plan so they can retire in dignity and security no matter what happens in the stock market.
Does this sound like a pipe dream?
It's not, it is achievable to increase the coverage and moreover, it's necessary as we are failing to properly cover an entire generation of Canadians who are at risk of seeing their standard of living decline significantly as they age well past their 80s.
Consider these points from the white paper:
- In 2001, the coverage rate for private sector employees under DB plans was 20.3%. In 2021, it was 9.3%.
- The maximum CPP payment in 2023 is $1,306.57 per month, while the average disbursement per
beneficiary is $760.07 per month.
These figures are accurate.
My father, a retired psychiatrist who worked 50 years as a clinician and retired at 90 years-old is now receiving $1,610.26 from his provincial pension (RRQ) and $778.45 in Old Age Security because he worked longer than usual and is truly receiving the maximum.
Most Canadians do not receive these amounts, they typically receive half of that and need to make income elsewhere to survive because after they're done paying off their rent, utilities, insurance and gas, there is little left over to buy food and other necessities.
The sad reality is many Canadians are hurting, especially during these high inflationary times.
Progressive Conservative leader Pierre Poilievre posted this on LinkedIn recently:
I couldn't resist replying:
When you barely have money to cover rent, gas and utilities, of course you're going to visit a food bank. The real ugly truth however is that the large majority of Canadians visiting food banks are Canadians with disabilities collecting on average $1,000 a month in disability benefits. That's scandalous, especially since CERB payments were set at $2,000 a month when inflation was at historic lows! And even though the new Canada Disability Benefit is a cause for celebration, the Liberals are dithering and haven't come up with anything yet despite the Bill receiving royal assent: https://www.investmentexecutive.com/news/industry-news/ottawa-begins-consultations-for-canada-disability-benefit/
The hypocrisy in Canada under this Liberal government is astonishing!!
I don't mince my words and I don't hide my dissatisfaction with Trudeau's Liberals.
But it's not just Canadians with a disability visiting food banks or employed people in Ontario, it's lots of senior citizens too who cannot survive off their CPP-OAS benefits.
Let that sink in, we are one of the richest nations in the world and yet we are not properly covering all our citizens during their retirement years, where they are most vulnerable to poverty.
Even worse, we literally have some of the best pension plans and funds all over the world, so there's no reason why we cannot properly cover all working Canadians looking for a secure DB pension plan they can count on.
Why is this the case? It's complex, lack of political will, the financial services industry keeps peddling inadequate solutions and that's why most Canadians are left on their own saving for retirement through sub-standard solutions like RRSP or TFSA.
The result? Not good, not good at all.
First, most Canadians are unable to save a dime after paying off their basic expenses and even if they can, they do not know how to invest that money properly to provide excellent compounded returns over the long run.
Trust me, it's not easy, these markets are difficult even for seasoned professionals, so if we expect Canadians to save $7,000 in their TFSA (new limit for 2024) and contribute to their RRSP and do well, we are delusional.
I'm blunt because I don't like wasting people's time.
Just like I see homelessness rising throughout Canada until we cut regulatory tape and start building apartments, condos and single family homes en masse, we are going to see pension poverty rise in Canada until we cover a lot more Canadians adequately, providing them a safe, secure and affordable pension plan.
It's that simple, I worry about Canadians but to be truthful, I have enough to worry about myself trading these markets to ensure I have more than enough savings to retire comfortably (which will not happen for another 20 years with a newborn baby).
I tell myself every day: "It's trench warfare out there, you have no pension plan, you need to make money or die."
Luckily, I'm not made like most Canadians, I can handle huge stress whether my portfolio is down huge or up huge, that's the nature of the beast I have to live with every trading day (living with progressive MS for 26 years taught me valuable lessons in living with high stress and uncertainty).
Alright, enough about me. Make sure you read CAAT's latest white paper here and talk to your employer about it.
Also, make sure you read the findings from a survey conducted by HOOPP and Angus Reid Group which shows more employers are offering retirement benefits, while those who don't may be falling behind.
And take the time to read a study from former Bank of Canada governor now special advisor to Osler, Hoskin & Harcourt Stephen Poloz called Pensions in the Next Age of Uncertainty.
I've said this many times, for a well-functioning democracy, you need three strong pillars covering healthcare, education and retirement.
We are doing well on the first two -- although it's debatable how well as they have both deteriorated significantly over the last eight years-- but we are not doing well covering the retirement needs of all Canadians.
Enhanced CPP will help over the long run but it's not enough.
We need better pensions for a better Canada.
Do you hear me Pierre Poilievre and company in Ottawa, you're all enjoying gold-plated DB plans, Canadians deserve the exact same thing.
Alright, now that I got that off my chest, watch a clip from CAAT Pension Plan on the power of DBplus.
More importantly, watch CAAT Pension Plan’s CEO and Plan Manager, Derek W. Dobson, share, in his own words, how the Plan is leading innovation, making pensions more accessible across Canada, and continuing to commit to benefit security and value for contributions for members and employers (2021).
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