Canadian Seniors: Retirement Planning To Avoid Poverty

Older couple walking along the beach discussing retirement planning and pension schemes to avoid poverty post their retirement.

I was fortunate to sit between former CAW President Buzz Hargrove and Al Kiel Managing Partner at Morneau Shepell ((the human resources and pension management company where Federal Finance Minister William Moreau was CEO until taking office) at the one-day conference organized by the National Institute on Ageing in November. The two might embrace opposing views on many things but one key issue they hold in common is an abiding interest in the Evolving Nature of Retirement, the subject of this conference held at Ryerson University.

The purpose of the conference was to underline how crucial it is to prepare the groundwork for the next generation of Canadians so that there are adequate pensions to support them during their senior years.

At the beginning of the conference, we were asked how many of us had parents who had employer-based pensions. A dozen or so put up their hands. Next we were asked how many of our children had employer-based pensions. Half a dozen put up their hands. Next we were asked how many in the room had employer-based pension themselves. Pretty well everyone held their hands up high.

That’s the story of the growing disparity in pensions that policy makers in government and the private sector are facing.  Recent retirees, on the whole, are well provided for. Many of us in the room were employed in the public sector. After taking retirement, we are enjoying the time and energy to pursue new careers or attend conferences such as this one.  We continue to work, with the proviso that CPP, OAS and our employer pensions cover basic expenses.

This conference was looking forward to the next ten or fifteen years and beyond when seniors could begin to retire without generous pensions to keep them safe and sound during retirement.

Derek Dobson, CEO and Plan Manager of the CAAT pension plan, the one I belong to, called for “an ageing strategy.” Today 42 per cent of Ontario’s budget is spent on health care. According to Dobson, in one generation that amount will double. He predicts that retirement income needs will increase. There will be delisted health services and increased taxes on seniors.

Canada is second only to Japan in having the oldest population. At the same time, there are 13-million Canadians today without a workplace pension. Folks across all generations are getting worried.  Dobson reports that overwhelmingly Canadians are willing to pay more in taxes to inherit a predictable income when they retire.

My generation of baby boomers took it for granted that we’d be able to maintain a middle class standard of living during retirement. That notion is fast becoming history.

It’s not surprising then, that how Canada, as a nation, arrives at intergenerational equity became the focus of the conference. One speaker, University of British Columbia Associate Professor Paul Kershaw’s suggestion was to tax housing wealth to help pay for medical expenses.  I looked at Buzz Hargrove and we both smiled. “That’s never going to happen,” I said. He added, “No government will ever do that and survive.”

The professor argued that a tax on housing wealth would both curb house prices and equalize earnings. No one at my table, which included representatives from Unifor and the Canadian Labour Congress, took his recommendations seriously.

The representative from Morneau Shepell, Al Kiel, mentioned to me that the best way to ensure income stability for seniors is to ensure the solvency of private companies. Mr. Kiel spends his days working with private firms facing bankruptcy.  “Try to tell an eighty year old that his pension is going down by 30 per cent,” he said.  His solution to intergenerational equity is to turn things round by regulating companies. “There’s no point in regulating the pension plan if the company falls apart. Help the company, not the plan.”

Kiel’s colleague, Fred Vettese, Chief Actuary at Morneau Shepell, also tackled the issue of intergenerational equity. From his point of view “Canada does not now have a retirement crisis” but he does explain why so many of us are concerned.  He argues that a steady decline in defined benefit pension income, longevity, rising costs of health care and medicine, the freelance economy and the low rate of return on investments have many Canadians scared.

Vettese takes the long view. Although he’s worried that individuals, people like you and me, are not particularly good at managing our finances during retirement, he believes other factors will save the day.  If the current federal government policy of raising CPP payments can’t singlehandedly avert an undignified retirement, working past 65 and modifying seniors’ spending patterns will help to rectify the inequity between current and future retirees.

David Herle, the owner of the Gandolf Group, states otherwise: that there is already a retirement crisis in Canada. Only 35 per cent of Canadians hold workplace pensions and that’s dropped from about 50 per cent of men in the 1970s.  In 2015, 33 per cent of Canadians put away “not one dollar in savings,” according to Herle.

Along with that data, 62 per cent of Canadians believe there is a looming retirement crisis. Herle is most worried about those working in “the gig economy.” The UBER drivers, the freelancers, the jobs so many are reliant on these days, none of which come with workplace pensions. In the next ten to 15 years, he sees those who had a middle class lifestyle becoming more dependent on the public purse.

How we prepare and protect the next generations of seniors from living in poverty, could be one of the most important issues facing Canadians today. As David Herle pointed out, the U.S. election presented “a package of insecurity to voters,” and that’s something we wish to avoid at all costs.

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