Crisis overlooked: private pensions

This election campaign left me extremely frustrated. Our politicians spent a lot of time talking about such matters as government waste, abortion, gay rights, and health care. But many other issues that should be given at least some attention on the hustings were almost completely ignored.

Take pensions, for example. This country’s private pension plans are in a crisis situation yet not one politician has addressed the issue in a major way. Only the NDP even mentioned it in the party platform and then with only a single line: “We’ll make it illegal to under-fund private pensions and make their employees and their pension plans the preferred creditor in the event of bankruptcies.”

There is something fundamentally wrong about that. We are facing a situation in which tens of thousands of Canadians may have their retirement income seriously compromised because of nationwide flaws in our pension system and not one political party chose to make this a major issue – or even a minor one.

Recognized as a serious issue
The gravity of the situation was highlighted again last month when a report was released by the Certified General Accountants sociation of Canada (CGA-Canada) which found that more than half of the defined-benefit pension plans in this country are in a deficit position. The report estimates that $160 billion is needed to cover the shortfall and provide for future indexing benefits. That’s billion, not million! It’s an astronomical amount. To put it into perspective, it is only slightly less than the entire federal government budget for 2004-05 and amounts to almost one-third of our total national debt.

In releasing the report, CGA-Canada warned of “a looming social and economic crisis”. You’d think that might have prompted at least one political party to bring the issue front and centre. But no one did.

This is not some theoretical problem created by green eyeshade types. It is a real and potentially devastating issue for people who have been contributing to pension plans for years on the assumption that their money was safe and that a comfortable retirement was assured. In some cases, it appears that is simply not true. Air Canada and Stelco, two companies that each have thousands of employees in their pension plans, are among those running big deficits. Nor is the crisis unique to Canada. In the U.S., employees of failed Bethlehem Steel had to be bailed out by a federal government-sponsored program when their pension benefits were threatened. There is no similar program in Canada, except for a very minor one in Ontario. That means our current and future pensioners are on their own.

For years, we were conditioned to believe that the real threat to our retirement income was the underfunding of the Canada Pension Plan. Now that bogeyman has been laid to rest, albeit only as a result of a huge escalation in the premiums we pay. Instead, it is the private plans that are in crisis.

In theory, the political parties might argue that since pensions are primarily a provincial responsibility the issue does not belong in a federal campaign. That would be nonsense, of course. Health care, education, and cities are also provincial responsibilities. That did not stop our federal leaders from putting them high on their agendas.

Not spending, but controls
In its report, CGA-Canada said that one of the major needs is to harmonize pension legislation in this country across all jurisdictions. As things currently stand, the whole system is “unwieldy, duplicative and potentially contradictory”. The report also calls for tighter controls on plans by government regulators, more precise rules on the ownership of pension surpluses, and changes to the rules that would require more frequent plan valuations. It also urges the federal Department of Finance to revisit the rules relating to allowable surpluses in pension plans when they exceed the current limit of 10 per cent.

None of these proposals require major spending commitments on the part of governments, so that should not have been an impediment to any politician who might have considered raising this issue in the campaign. But no one did.

Let’s hope that when the minority Parliament meets, someone will put this issue on their agenda. Continuing to ignore this simmering caldron will almost certainly result in serious financial hardship for many Canadians in the years to come, which in turn will lead to substantially increased costs for our social safety net.