As yet another RRSP season wraps up, the debate over the proper approach to ensuring adequate retirement savings for Canada’s aging population is raging on once again. The financial services sector must take a pragmatic, reasonable position on this issue and put aside short-term self-interest.
For years, the financial services sector has preached on the importance of saving for retirement. Now, faced with the prospect of a new public pension plan being launched in Ontario, the sector is in the odd position of arguing that there isn’t a critical shortfall in retirement savings after all.
In submissions to the consultations being carried out by the provincial government in Ontario on the design for a new pension plan, the sector argues that there is no major threat of insufficient savings. Instead, the position is that most people will be able to maintain a reasonable standard of living in retirement. Many people have workplace pension coverage. Of those that don’t, the rich will have been able to save enough to live on by themselves, and the poor will be adequately supplied by existing social programs. The sector consensus is that just those in the middle class who don’t have pensions, and who haven’t been able to squirrel enough away, may face a drop in lifestyle once the paycheques stop coming.
Many people will be just fine under the existing system. But the sector’s position is strikingly incongruous with the message that financial services firms have been sending for so many years about the need to increase savings. And, arguing against preparing for future financial pressures seems to be out of touch, given the aging of the population, increasing lifespans, persistent low portfolio returns and Canada’s diminishing economic growth potential. Trying to convince a government that has already committed to building a new pension plan that the problem it’s seeking to address doesn’t exist seems pointless. It’s too late for that.
Instead of being retirement crisis deniers, the financial services sector should focus its efforts on pushing for solutions. Ironically, that may mean supporting an expansion of the Canada Pension Plan – particularly if the alternative is for each province to create its own public pension plan.
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