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BC 'Leading' National Discussion on Fixing Pensions: Hansen

Labour, BC Liberals, others jostle to put forth new retirement plans.

By Andrew MacLeod, 3 Dec 2009, TheTyee.ca

Colin Hansen

BC Finance Minister Colin Hansen

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In normally divided British Columbia, politicians in both major parties agree something needs to be done to fix the pension system and better support people who've retired.

The first question, however, is what's to be done. The next is whether their counterparts in other provinces and the federal government can be convinced.

"That's a very active file for us," Finance Minister Colin Hansen told The Tyee in a recent interview. "We're actually leading some of the national discussions on new pension options."

In the past couple years, there have been rumblings about a new provincial plan, perhaps implemented jointly with Alberta. But there are other options on the table, and Hansen said one of them is a solution the Canadian Labour Congress is promoting.

"The details have not been forthcoming," said New Democratic Party finance critic Bruce Ralston, who asked Hansen about pension plans during November's budget debates. "My sense from his comments is they've not made a decision, and I think they sense the difficulty of the endeavour they've started."

BC and Alberta's plan A

As Hansen sees it, it's people with average incomes who are most in need of a fix. "We're actually very good in Canada at providing adequate retirement income for sort of the lowest 20 per cent of income earners and the highest 20 per cent of income earners. Where there's inadequacy is in the middle," he said.

The Canadian Pension Plan is one of the best programs of its kind in the world, he said. Still, it leaves many people short. "It doesn't meet adequate income replacement post-retirement for many Canadians. You could argue in excess of 50 per cent of Canadians."

The desire to improve the incomes of people who've retired goes back at least a couple years in the province. In Oct. 2007, B.C. and Alberta appointed a "joint expert panel on pension standards and recommendations."

A year ago November, the six-person panel released its 241-page report, Getting Our Acts Together: Pension Reform in Alberta and British Columbia. "Just over 20 per cent of private sector workers in the two provinces are enrolled in pension plans," it found.

"We advocate that the governments of British Columbia and Alberta create a new pension plan, to be operated as a non-profit entity at arm's length from government but regulated under the pension standards legislation," the report said. "The plan would be available to any employer, employee or self-employed person at a reasonable cost."

It would be a simple defined contribution plan, and for employees participation would be voluntary. They would be enrolled automatically, but allowed to opt out, the report said. Also, self-employed people would be allowed to opt in.

The government would set up the system, which would be designed to run without ongoing public funding. "Although some start-up costs would likely have to be financed by the governments, the governments would have no ongoing costs or liabilities." Still unclear is exactly how the pool of money would be managed for safe, steady gains, and who would be responsible for overeeing the fund.

As a defined contribution plan, the system would be more subject to the ups and downs of the market than a defined benefits plan -- the kind of pension fund that guarantees a certain payout for every dollar the worker and employer or government entity invests.

A second option being discussed, said Hansen, is a proposal by former CPP/QPP adviser Keith Ambachtscheer to create a new national supplement to the CPP that would increase retirement payments to middle-income Canadians. That, too, would be a defined contribution plan.

Another option, labour endorsed

In the months after the Alberta-B.C. panel released its report, the Canadian Labour Congress released a discussion paper of its own, Security, Adequacy, Fairness: Labour's Proposals for the Future of Canadian Pensions.

The tanking of the global economy had exposed major faults at the heart of the Canadian system, the authors found. With jobs disappearing and investments shrinking, millions of Canadians have been put at financial risk, the 21-page discussion paper said.

"The maximum value of public pensions falls well short of replacing the 50 per cent to 70 per cent of pre-retirement income needed to maintain decent living standards," it said. "Compared to many other advanced industrial countries, our public pension system is very underdeveloped." Nor are private pensions reliable, it said, with just one-in-five covered at all and many worried about what happens when plans get into financial trouble.

"Our priorities for change call for a major shift from private to public pensions, and greater security for members of existing employer pension plans," it said.

They proposed three solutions, starting with doubling the benefits from the Canadian Pension Plan. Over a seven to 10 year period the amount of earnings replaced by the CPP would double from 25 per cent of a person's pre-retirement income to 50 per cent. It would be financed "by a modest increase in worker and employer premiums which would be fair for lower paid workers."

The CLC also proposed increasing the amount of Old Age Security benefits paid to seniors and creating a national system to insure pension plans the federal government regulates to guarantee benefit levels from private plans.

Hansen prefers national plan

Alberta's Finance Minister Iris Evans was recently quoted saying that if a national consensus can't be reached on improving pensions, the west would go it alone.

Hansen echoed Evans' comments. "It would certainly be preferable to have a national plan that all provinces bought into and supported," he said. "We've made it clear that if we can't build national consensus on this we will proceed on a regional basis."

Pensions will be a subject of discussion at the finance ministers' meeting scheduled for Dec. 17 in Whitehorse, he said.

"What I said to my colleagues nationally is 'we're not going to sit around and contemplate on this for 10 years,'" Hansen said. "We think there is a certain urgency to it today and we're not going to spend a lot of time building a national consensus.

"We think that the national approach makes sense, but if we can't achieve it in the near term then British Columbia, Alberta and whichever other provinces want to participate with us will proceed on our own."

Various options are under consideration, including the joint Alberta-B.C. proposal and the CLC's plan, he said. Hansen said his preference is for a national plan that won't impede labour mobility and for one that's as broad as possible.

266,000 seniors in poverty

The NDP's Ralston said optional plans like the one suggested in the B.C.-Alberta review haven't worked as well in the past as universal programs like the CPP.

"The thing about the Canadian Pension Plan, it exists, its portable, it's national, other than Quebec, it's administrative costs are low," he said. "It's kind of the building block for retirement security for just about everybody."

It's also low-cost to administer, especially compared to creating many smaller private plans, each with their own investment manager, he said. "The financial services industry, you know, they have to get paid."

The most important thing for people is that there will be a secure pension available for them when they're done working, he said. "An increase to the benefits under CPP is something I think most people would support."

In a campaign-style speech to the BC NDP convention on the weekend, federal NDP leader Jack Layton called for a doubling of CPP benefits.

"We have an aging population and they've been hit hard," he said. Some 266,000 Canadian seniors live below the poverty line because of the low level of benefits for the elderly, he said.

"In other words, we have a government program that keeps people below the poverty line. And most of these are women. These are the people who raised us. These are the people who fed us, who built our community and built our economy."

For about $700 million, or less than half the corporate tax cut scheduled to take effect Jan. 1, all those seniors could be lifted out of poverty, he said. "We propose we take the Canada Pension Plan as that rock-solid basis for retirement security for seniors and we take the $900 maximum payment which is there now and we move towards doubling it towards $1,800 a month so every senior can live a decent life."

Jack Layton's New Democrats and the B.C. Liberal government don't often agree on matters of policy, but in this case the CLC proposal is nothing B.C. Finance Minister Hansen will say he is against. In fact, despite the significant differences between the Alberta-B.C. plan and what the CLC wants to do, Hansen refuses to take a stand on which he or his government prefers.

Asked how optimistic he is about Canadian politicians agreeing to a national pension fix, B.C.'s Finance Minister Hansen said, "I guess we'll have a better sense of that after the discussions in Whitehorse." [Tyee]

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria. Reach him here.

24 Comments:

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  • ReeferMadness

    2 years ago

    Craziness

    A regional pension plan? What a waste. Let's beef up the Canada pension plan to address these issues.

  • rangergord

    2 years ago

    CPP A Rock Solid Foundation?

    Ha ha ha! It may seem a bit better than Social Security but there are enormous liabilities ahead for the CPP. The stock market is on the precipice again and the bond markets are another bubble. Not to mention the continued commercial and residential real estate crises. Just checkout the investment portfolio of the CPP online and see if it fills YOU with confidence given the direction of the economy. The future of the CPP? A flood of cheques filled with devalued dollars created through quantitative easing because no one wants to lend corporate and government deadbeats another dollar.

  • Van Isle

    2 years ago

    When people, like Colin

    When people, like Colin Hansen, say they're going to fix the system, they really mean they're going to fu*k the system.

  • Conductor274

    2 years ago

    BC Liberals reputation

    Look over Campbell's ethical record. Tell me you're going to trust his outfit to provide you with a sustainable pension plan. That takes years of accurate, futuristic and honest financial planning.
    This spring Campbell and Hansen told us the BC deficit was going to be 495 million dollars. Within a matter of months the books show it's actually 2.8 billion dollars! Ya I want these guys running my pension plan.

  • Curt

    2 years ago

    I don't want these

    I don't want these politicians tinkering with people's contributions. Look at the debt we have amassed under these liars. Keep politicians out of this! This is truly scary. Remember Enron, Madoff? Playing with people's money and looked what happened.
    Keep your hands off!

  • bpither1

    2 years ago

    Actually it's because of

    Actually it's because of once pending liability issues in the late nineties that the CPP Investment Board was created nd funded by contributions. By investing in a reasonable mix of equities and fixed income they have done very well over the past decade. According to the World Bank it is one of the better managed pension entitlement schemes, primarily because of funding changes some 10 plus years ago and the creation of the board. By portfolio comparison - that is to say by comparing investment management of your CPP contributions with the silly recommendations digested by the vast majority of those who leave their RRSP decisions in the hands of their bank or financial advisor - the drop in CPP value last year wasn't that much. On the other hand they have made a reasonable return this year, and according to a recent article in the Vancouver Sun it "exceeds the level the fund reached before the economic crisis".

  • Grania

    2 years ago

    Pensions

    It is important that Mr. Hansen and Mr. Campbell have NOTHING to say about pensions for seniors. They have stolen medical benefits from retired provincial civil servants who are still trying to have these benefits reinstated through the courts. The only reason there is any interest by any politician is because we can still vote...and vote we will!

  • RickW

    2 years ago

    What Hansen would REALLY like to do.....

    ....is put ordinary retired people on an iceflow and set it adrift. Much the same as Kevin Falcon would like to do with ordinary people who have the temerity to get sick, and call upon the healthcare system.

    Quote:
    They would be enrolled automatically, but allowed to opt out, the report said. Also, self-employed people would be allowed to opt in.

    And ain't it amazing now, that self-employed persons are recognized when it comes to collecting premiums. But they are non-existant when it comes to citing employment and unemployment figures.

  • Skywalker

    2 years ago

    No RickW, anything that needs fixing..

    ...can be fixed by sending the whole liberal government out.

  • plg

    2 years ago

    seniors living in poverty

    A federal policy paper for the National Advisory Council on Aging, "Seniors on the Margins, Aging in Poverty in Canada" (2005) has some good insights into this issue.

    One interesting piece of data included in the paper was that once again BC is number one when it comes to seniors poverty. The paper states that BC and Quebec both have the highest number of seniors living in poverty at 10.3%!

    What's more important and relevant to this story is the number of seniors (19%) who live just above the poverty line or before tax low income cut-off (LICO) and would be classified as living below the poverty line if you calculated their incomes on after-tax income.

    These seniors, in reality living below the poverty line, are not eligible for many government programs.

    As the paper points out, "These persons cannot access the benefits of income-tested programs and must therefore try to get by with an extremely small budget."

    If we can remember so far back to 2002, the BC Liberals have helped in making many seniors of this province ineligible for programs. Perhaps as a measure of sincerity, and in the interim before a decent pension program is in place, Mr. Hansen could remedy this situation that leaves a vast number of seniors ineligible for government services.

    And in the meantime, is there room on those BC Licence Plates, the dog's breakfast of graphic design, for two more dubious honours of #1 distinction?

    ...now let's see, "Best Place on Earth"...below in small print..."except for children and seniors".

  • plg

    2 years ago

    The health of CPP

    Last year Canadian workers contributions to the CPP was $6.6 billion which more than off-set the negative investment returns (non returns).

    The investment fund is estimated to have a worth of almost $100 billion and is well funded to assure payments to seniors until 2020.

    This is an investment fund which is not subject to the whims fears and greed of individual investors and unlike individual investors who are impacted by how much money they have to invest, the CPP Investment Board, receives daily contributions of $18 million a day.

    Yes, if there is a severe economic meltdown, even an economic depression, CPP will be impacted, but it won't just be seniors facing challenges it will be all of us together. (Except perhaps senior executives who will find a way to get their bonuses even as they jump from their windows).

  • freebear

    2 years ago

    They want retirees to have more money

    so they can grab it back in taxes and user fees to pay for the retirees medical care!

  • dorothy

    2 years ago

    Here's why 'investments' are problematic...

    http://www.census.gov/ipc/www/idb/informationGateway.php

    It only works if there are enough younger people to make the wheels go round. It doesn't look as if there will be any time soon. There is a limit to how much we can rip them off to look after us. Those able to must do so themselves...There is no financial trickery that will fix this. Maybe we need to teach old people to grow their own food, and give them someplace to do it. I have always taken more or less for granted that it would be what's available for me. Do the math, darn it!

  • RickW

    2 years ago

    Skywalker

    Trouble is, they can do a hulluva lot of damage in the 3 years they have left...............

  • RickW

    2 years ago

    plg

    Maybe that $100 billion is making the likes of Hansen drool.......

  • Dungeness_Crab

    2 years ago

    Dear public servant: stop

    Dear public servant: stop "helping" me!

  • crankypants

    2 years ago

    Oh-Oh

    This is just what we need, a finance minister that has proven he knows little of which he speaks trying to tackle the pension problems facing many of us. By the time he is done pensioners will be paying money out of their pockets rather than receiving any.

    BE AFRAID, VERY AFRAID!!!

  • ME2

    2 years ago

    CPP is a working, solvent, Gov't program.

    So I'm in full agreement with pfilger and plg.

    Penions should be mandatory and fully portable. They should be removed from the grasp of industry which all too often takes the "excess" profits and/or uses the funds for its own ends, a la Nortel and the Steel and Auto industries.

  • Hughes

    2 years ago

    Pension Pap

    Hansen 'n' Campbell are picking my retirment pocket with the HST with one hand while they offer up an olive branch with the other. How can anyone believe anything they say after the latest pair of lies (HST and deficit) prior to the election. And don't forget the 54% increase Campbell gave himself and the golden pension plan these crooks are going to receive when they cut 'n ' run, also out of your pocket.

  • RickW

    2 years ago

    If anyone thinks pensions are "safe".....

    .....consider this with EI:
    http://action.clc-ctc.ca/en/canadian-labour-congress-clc-statement-canada-employment-insurance-financing-board-ceifb

    The key failure of Bill C-50 is that it neglects to make all or even any part of the huge accumulated EI surplus of $54 billion available to improve EI benefits as sought by the labour movement, social development, and anti-poverty organizations and many provinces.

    With respect to EI financing issues, Ministers of Finance have recently taken the position that the EI Fund is an accounting fiction since it has (since 1986) been completely integrated with the Consolidated Revenue Fund. However, as has recently been noted and detailed by the Canadian Institute of Actuaries, the government continues to maintain and publish details of a separate Employment Insurance Account as part of the Public Accounts, complete with annual interest paid on the accumulated surplus. Until the late 1990s, the surplus was justified by the government on the grounds that it was a "rainy-day" fund needed to backstop the EI program, and to avoid premium increases in the event of a recession.

  • make_up_another...

    2 years ago

    If Only I Had A Real Pension

    There's pensions? Where? Can I get one?

    I think if you make less than 60k or so, you are actually better of with a TFSA since your max RRSP contribution would be the same and with the TFSA, you aren't locked in and you are tax sheltered rather than tax-deferred.

    The RRSP route can hurt lower income earners if they build too much and price themselves out of the Guaranteed Income Supplement. Don't fall for the miracles of compound interest. The projections they give you aren't realistic, from what I have read.

    The banks always give you this scenario where you invest and end up with a million plus dollars. I read somewhere that for that to really happen, you'd have to start with seed money of 50k when you're about five years old.

  • lynn

    2 years ago

    Situation Normal All "Fixed" Up

    Van Isle in his comment way above gave a very good definition of BSLiberal-speak for "fixing the system."

    When a government gives a successful public railway away for 990 years....then refuses to disclose the significant details of the deal.... and finally tries to tell the citizens of this province that we still own it, take it as a sign as to what "their" definition of "fixing" something is.

  • Bailey

    2 years ago

    So much irony they have to avoid magnets

    This is the same team that, on their very first full day in office almost 9 years ago cut 3 Billion dollars a year from the taxes of British Columbians making over a quarter mil a year.

    It has not resulted in prosperity for anyone but British Columbians making over a quarter mil a year.

    Three Billion is coincidentally the same number as our Provincial deficit, and a very near approximation of the annual cuts to services British Columbia has been suffering under.

    Three Billion X 9 years = enough to conquer all poverty, and create justice and fix all health care and provide adequate pensions to seniors and the disabled as well.

    The best predictor of future behaviour is past behaviour.

  • circle A

    2 years ago

    Howe street can`t wait...

    to get their hands on all our pension contributions,I`m betting that would be the "new pension options" our pencil neck weasel liar finance minister has in mind. reminds me of the scam cooked up by the socreds/liberal party bagmen on howe street, remember BCRIC.

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