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Solving Canada’s Pension Coverage Problem: A Modest Proposal

Solving Canada’s Pension Coverage Problem: A Modest Proposal. Keith Ambachtsheer Canadian Institute of Actuaries Pension Seminar April 15 2009. Context for CSPP Proposal: Observation #1. Financial Crisis flaws in DB, DC, RRSPs Incomplete contracts Risk substitute for contributions

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Solving Canada’s Pension Coverage Problem: A Modest Proposal

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  1. Solving Canada’s Pension CoverageProblem: A Modest Proposal Keith Ambachtsheer Canadian Institute of Actuaries Pension Seminar April 15 2009

  2. Context for CSPP Proposal: Observation #1 • Financial Crisis flaws in DB, DC, RRSPs • Incomplete contracts • Risk substitute for contributions • Human foibles • Agency problems

  3. Canada has 15-year pension reform cycle Mid-1960’s early 1980’s late 1990’s early 2010’s Pillar 3 reform process has commenced – ABC, ON, NS, FED Findings: coverage & innovation problems Solution elements: target benefit plans with broad coverage and cost-effective delivery Example: Canada Supplementary Pension Plan Context for CSPP Proposal: Observation #2

  4. Canada’s Retirement Income System: The Numbers

  5. Canada’s Retirement Income System: The Numbers (cont’d)

  6. Automatic enrolment of all non RPP-covered workers into the CSPP Use CPP/QPP payroll deduction mechanism Operate within the existing tax and regulatory regime for pensions Target a 60 percent post-work earning replacement rate Set earnings floor and ceiling for CSPP deductions Set automatic default CSPP contribution rate The Canada Supplementary Pension Plan (CSPP)

  7. Provide an opt-out option Provide an opt-in option Provide an RRSP assets transfer option CSPP operates at arms-length from government CSPP operates as an expert, high-performance financial institution CSPP offers a number of annuitization options A ‘paternalistic libertarian’ philosophy The Canada Supplementary Pension Plan (CSPP)

  8. Ontario Committee on Portable Pensions (1961) Northern Europe and Australia TIAA-CREF and the Saskatchewan CSSPP UK Pensions Act (2007) Other Times and Other Places

  9. Reach ‘target’ 3.5 million workers Reach organizations representing employees and employers Reach members of Parliament and Provincial Legislatures and their officials Identify Pension Champion(s) Stage National Pension Summit Reach consensus on an action plan Implement action plan An Action Agenda

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