Be it resolved that Canadians are Incapable of Preparing for their Retirement Needs

June 5, 2012

We don’t need to fix something that’s not broken.” - HOOPP President & CEO Jim Keohane

 by ARIA staff

May 31, 2012 - The great debate on retirement – can Canadians save enough on their own – came to the University of Toronto’s Hart House May 30.
Before a packed crowd of experts featuring executives from financial institutions, pension plans, the provincial government, and noted pension bloggers Bill Tufts and Leo Kolivakis, HOOPP President & CEO Jim Keohane and David Herle of the Gandalf Group argued for the affirmative, while MoneySense editor Jon Chevreau and noted actuary Malcolm Hamilton argued for the negative.

John Tory, NewsTalk 1010 host (from left to right); Jim Keohane, President and CEO of Healthcare of Ontario Pension Plan (HOOPP); David Herle, Principal partner Gandalf Group; Jon Chevreau, Editor of Moneysense; and (not shown) Malcolm Hamilton, Principal and World-wide partner, Mercer, participate in the Great Pension Debate, Wednesday, May 30, 2012, in Toronto. The Canadian Press Images PHOTO/Healthcare of Ontario Pension Plan

HOOPP and the Walrus Foundation partnered to host the debate in order to address the increasingly pressing issue of how Canadians can achieve adequate retirement savings in an engaging and informative format, bringing together leading thinkers from all sides of the pension debate.
Keohane said moving away from defined benefit pension plans in the workplace over the past 30 years is a “a very troubling trend.”
He said switching workers to defined contribution plans is “not about cost savings, it is about the transfer of risk.”
Leaving it up to individual Canadians to do the savings is a dangerous idea, as most have been “unable or unwilling to save for their retirement.” He noted that there is more than $600 billion in unused RRSP room in Canada, and the average Canadian’s RRSP totals just $60,000 at retirement – only enough to provide income for a few years.

When those with inadequate pensions and savings start hitting retirement age, Keohane said, “it is likely to create a crisis in the social welfare system.” Defined benefit plans should be expanded, not eliminated, he said. “We don’t need to fix something that’s not broken.”

Jon Chevreau, editor of MoneySense, took the opposite point of view in the debate. 
“If it’s true working Canadians are incapable of providing for their own retirements, how do we explain the fact those already retired are for the most part doing fine,” he asked, adding that the OECD described Canada’s retirement system as “high performing,” and old-age poverty is comparatively low.
“Canadians may not know what they are doing … but they seem to be doing it remarkably well.”
He said low-income earners don’t need to save at all for retirement, and those making $20-$50,000 a year only need to save about $2,000 per year in Tax Free Savings Accounts to have adequate retirement income.
Chevreau concluded that most Canadians are “up to the challenge” of looking after their own retirements.
David Herle, Principal of the Gandalf Group, argued for the affirmative, noting that recent polling by Gandalf shows that having enough to retire is the top concern of more than 35 per cent of Ontarians.
He said 86 per cent of Ontarians believe there is an emerging retirement income crisis in Canada – and that only 29 per cent feel they have an good workplace program.
Eighty-five per cent of those surveyed feel employers have a responsibility to offer a good workplace pension plan, and 80 per cent were interested in being part of a defined benefit pension program.
The survey was conducted by the Gandalf Group between May 3 and May 16, 2012. For more information about the results of the survey, click here. 
The polling shows that Canadians are unprepared for retirement, he said. “We are careening towards a cliff.”
He said that while today’s retirees may be doing fine, those about to retire have substantially more debt than savings.
“The retirement dream is disappearing,” he warned, since for most people, the only savings they have is the equity in their home.
Actuary Malcolm Hamilton agreed that while Canadians may be financially illiterate, today’s retirees are living on retirement income equal to about 91 per cent of what they made at work. 
Both the Canada Pension Plan and the Old Age Security systems are well funded and sustainable.
And while other countries have debt to gross domestic product ratios of 85 per cent, Canada’s is only 40 per cent, meaning that if there was to be a future burden on social programs, Canada will be able to respond.
He said the cost of providing medicare is a bigger problem than retirement income.
John Tory of NewsTalk Radio 1010 in Toronto served as moderator, adding that it is important to have “a proper discourse in this country” about the need for retirement income adequacy.
Here is a video clip showing highlights of the debate:

• ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

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