Canadian government proposes new risk-sharing pension plan
By Leah Schnurr and Andrea Hopkins
TORONTO (Reuters) - Canada's Conservative government proposed a new voluntary pension plan on Thursday that would shift investment risks to employees in a bid to make pensions more sustainable, touting it as a third option to the two main types of plans now in place.
The proposal heats up the debate over the best way to ensure a financially secure retirement for an aging population as pensions struggle with poor returns after the financial crisis and employers try to rid themselves of the burden of pension liabilities.
The government also reiterated its position that this is not the time to increase contributions to the well-regarded Canada Pension Plan (CPP), an arm's length government program that provides pensions to all employees in Canada. Several of the country's provinces, notably Ontario, see increased funding for the public CPP, and the QPP Quebec variant, as the best way to secure financial safety in retirement.
The federal government's proposed pension plan option is a targeted benefit plan that would provide a hybrid alternative to the defined benefit and defined contribution plans most commonly used in Canadian workplaces.
The option would be available to employees of government-owned corporations and private sector companies that are federally regulated, including those in the banking, telecommunication and transportation sectors. There are currently more than 1,200 federally regulated pension plans.
"Private pension plans across Canada are facing increasing challenges in providing a secure and predictable stream of income to Canadians in their retirement," said Secretary of State for Finance Kevin Sorenson, who announced the proposal during a speech in Toronto on Thursday.
"This framework will help address the long-term sustainability of pension plans by offering predictable benefits in both favorable and adverse market conditions."
The announcement drew immediate criticism from the opposition New Democratic Party, which called it "another Conservative step in the wrong direction". Continued...