Presentation Transcript

1. Bigger Public Pension Plans or More PrivateSavings?

   Michel Kelly-Gagnon, president Youri Chassin, economist Montreal Economic Institute www.iedm.org May 23, 2014
2. A Relevent Policy Discussion A relevant discussion for you (as taxpayers and when managing assets or savings) An ongoing debate (and a very heated one right now, especially in Ontario) Voluntary private savings versus compulsory savings (which can be managed either privately or through a government entity)
3. A Current Policy Discussion Currently, in Canada: Unions and the NDP are in favour of a bigger CPP In Ontario, the Liberal Party isproposing a bigger public pension plan in addition to the CPP In Quebec, the D’AmoursReport Suchproposals are based on the wrongdiagnosis. Also, public pension plans have defects and privatesavings have advantages.
4. Diagnosis Some don’t save “enough”? The middle class and the affluent (the poorest are well protected; Canada enjoys one of the lowest poverty rates in old age). Middle class families save differently, through non-financial assets (mostly real estate) Real estate value estimated at around $1800 billion, more than RRSPs and TSFAs combined The value of a paid house in retirement increases disposable income by 10% to 15%, according to Statistics Canada “Enough” to retire at 65 with a predefined income replacement rate of 60%. But retirement is a voluntary decision
5. Solution Bigger mandatory public pensions through payroll taxes? OR Voluntary private savings over which you have property rights? This debate is not just a technical one. There are some more fundamental issues at stake here
6. Solution Temporal myopia and intergenerational equity
7. Solution Temporal myopia and intergenerational equity Pooling of risk and intra-generational equity Regionalmean: 81,3
8. Solution Temporal myopia and intergenerational equity Pooling of risk and intra-generational equity Administrative fees and returns Source: Canadian Federation of independent businesses, Canada’s Red Tape Report, 2013, p. 13.
9. Solution Temporal myopia and intergenerational equity Pooling of risk and intra-generational equity Administrative fees and returns Solvency and performance “What Dumont proposes is to play Monopoly with retirees’ money [says Charest]” – Radio-Canada, October 10, 2007 “Charest politicized the Caisse de dépôt, says Dumont” – La Presse, November 30, 2008
10. Solution Temporal myopia and intergenerational equity Pooling of risk and intra-generational equity Administrative fees and returns Solvency and performance Owning private savings More flexibility to face unforeseen circumstances Retirement or inheritance Personal responsibility means better information Investments according to personal profile and preferences
11. Conclusion Thank you!