Overwhelming Concern about Inadequate Retirement Incomes; Strong Support for C. D. Howe/Keith Ambachtsheer Canada Supplementary Pension Plan

Transcription

1 Overwhelming Concern about Inadequate Retirement Incomes; Strong Support for C. D. Howe/Keith Ambachtsheer Canada Supplementary Pension Plan BDO Dunwoody Weekly CEO/Business Leader Poll By COMPAS in Canadian Business For Publication January 29, 2009 COMPAS Inc. Public Opinion and Customer Research January 29, 2009

2 1.0 Introduction CEOs and business leaders on the COMPAS business panel express intense overwhelming concern about the state of retirement preparedness in Canada today; 85% consider the adequacy of retirement incomes a priority issue. A C. D. Howe paper by the highly regarded pension expert, Keith Ambachtsheer, proposed a Canada Supplementary Pension Plan. Members of the COMPAS business panel were asked to assess eight key features. All eight features earned majority support. Strongest support was expressed for the libertarian and flexibility provisions of the proposal, for example allowing workers to opt in or invest the RRSP assets in the proposed CSPP. Lowest majority support was expressed for compulsory enrolment of all workers. These are the key findings from this past week s Internet survey of CEOs and business leaders on the COMPAS panel. The weekly business survey is undertaken for Canadian Business magazine under sponsorship of BDO Dunwoody LLP. 2.0 Intense Concern about Inadequate Retirement Preparedness CEOs and business leaders on the COMPAS business panel express intense overwhelming concern about the state of retirement preparedness in Canada today; 85% consider the adequacy of retirement incomes a priority issue, as shown in table 2. 2

3 Table 2: (Q1) About a year ago, the Canadian Institute of Actuaries looked at the adequacy of retirement incomes. The Institute calculated that only a third of households are apt to have enough income in retirement. On a 7 point scale where 1 means non-priority and 7, a priority issue to consider, how would you score the importance of this issue? Mean DNK Assessing the C.D. Howe/Keith Ambachtsheer Proposal for a Canada Supplementary Pension Plan A C. D. Howe paper by the highly regarded pension expert, Keith Ambachtsheer, proposed a Canada Supplementary Pension Plan. Members of the COMPAS business panel were asked to assess eight key features. All eight features earned majority support. Strongest support was expressed for the libertarian and flexibility provisions of the proposal, for example allowing workers to opt in or invest the RRSP assets in the proposed CSPP. Lowest majority support was expressed for compulsory enrolment of all workers. 3

4 Table 4: (Q2) A paper from the C. D Howe Institute proposed a Canada Supplementary Pension Plan (CSPP). On a 7 point agreement scale where 1 means strongly disagree and 7, strongly agree, please score your agreement with the following specific proposals? Mean DNK Individuals would be allowed to opt in CSPP would operate at arm s length from government Those who opt in would be allowed to invest their RRSP investments in the CSPP Each individual worker would have the right to opt out CSPP s goal would be to top up OAS and CPP/QPP to provide 60% income replacement To minimize cost and maximize simplicity, CSPP contributions would be collected in the same way as CPP/QPP contributions For reasons of simplicity, the CSPP would work within existing tax rules, for example the rule about maximum deductibility All Canadian workers not members of a work-place pension plan would be enrolled automatically in the new CSPP plan The following verbatims provide a nuanced sense of panel opinion: 4

5 The question is if governments can invest funds better than individuals. Setting up another plan would add to costs and will not solve where to invest funds. The past year has shown that wherever funds are invested can erode, thereby creating another problem and another need to fix that problem. There is no simple solution and the majority of taxpayers do not have the skills to invest on their own account. Professional fund managers are there to assist them, but their attempts can have negative results as well as good. Another plan is just that, another plan. The Government should NEVER have placed the Canada Pension Plan contributions into General Revenues. These should have been placed into a separate account, invested in securities OTHER than lending to Governments at preferred rates and paid out according to earnings and investment into the account. Sadly, not everyone has a union or gold-plated government pension to count on. Opting in or out will not provide for irresponsible people to retire in comfort. Not sure why we need to legislate financial responsibility. Some people will not have a pension and still manage because they planned appropriately...others just don't have a chance. Medical care costs account for disproportionate outgoing expenditures on the national debt load as we age. We need to look at new approaches to radically cut major medical costs such as cancer care. Effective alternatives currently exist but are not encouraged. In order for this plan to work it must be compulsory for all workers. If workers can opt out, then it will fail. I'm concerned that CPP is going to struggle to meet its commitments in the future and another program that is at 5

6 arm s length from the government would seem to add a level of security. I think we need to publicize what we have and concentrate on making that work. The solution to one set of problems is not to start another set of problems. The current system that we have needs to be simplified not made more complicated by adding CSPP. Stop the madness. I believe that [CPP] should be brought to a level of the minimum wage in order to be an honest attempt to eliminate poverty. Those requiring additional pensions should be allowed to pursue them in the private sector but the funds would be subject to government audit and guarantee to avoid the banks taking advantage of the situation for their shareholders. Given projected demographic trends it seems axiomatic that retirees must have sufficient funds to maintain spending for the economy's sake, let alone their increased need for medical/social support at a time when the workforce will be considerably smaller, inhibiting its ability to sustain and maintain the retirees. At the end of the day anyone placing faith in government to cover their retirement costs will more than likely be disappointed. When was the last time government met or exceeded expectations on anything? As a result of current disaster in the financial markets, it makes perfect sense to provide some decent retirement income for people with backing from government. It is not fair at [the] age of retirement you lose all or substantial values of your savings because of bunch of crooks that you don't have any control on them. 6

7 4.0 Methodology The COMPAS web-survey of CEOs and leaders of small, medium, and large corporations was conducted January 20 22, Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of n=135 are deemed accurate to within approximate 8.5 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D. and Tamara Gottlieb. 7