WHITEHORSE—Finance minister Jim Flaherty says he will not be pressured into a quick fix for the country’s pension system, but believes he is close to forging a consensus with the provinces about what steps to take next.
“We’re not going to shoot from the hip on this,” Flaherty said in an interview on the way into a dinner meeting with provincial finance ministers last night.
“This is too important for the next generation of Canadians that we get the pension issues right,” he stressed.
Flaherty met his colleagues on a relatively balmy evening of minus-seven on one of the darkest days of the year. They dined at the new restaurant of the Skky Hotel, overlooking the town’s airport and downtown.
The Whitehorse meeting has been months in the making. Under pressure from some provinces who want to see major changes to the way Canadians save for retirement, Flaherty’s parliamentary secretary Ted Menzies held cross-country hearings earlier this year.
Ottawa also asked economist Jack Mintz to do a thorough examination of the state of retirement income in Canada.
His findings were to be released today.
The adequacy of retirement income has deteriorated quickly in the past few years as more and more companies abandon pension arrangements or switch from defined benefit plans to defined contribution plans, which typically are less generous and more subject to market risk.
The global financial crisis and the aging of Canada’s population have exposed the problems of Canada’s pension system.
While some interest groups and provinces clearly are tired of the study stage and eager to move to the action stage, Flaherty is resisting.
“We’re going to be very deliberate in the work we’re going to do here on pensions,” he vowed. “I’ve already had some discussions with my finance minister colleagues and I think we have a consensus.”
He did not say what the consensus was based on, but Ottawa has stressed that holding public hearings on the options for reform over the coming months is central.
The federal government also has expressed keen interest in getting the financial services sector more involved in negotiations.
“The key for us is to make sure we’re analyzing the problem correctly,” Flaherty said.
Studies have shown that almost two-thirds of working Canadians have no registered pension plan coverage, and almost one-third of families have no retirement savings.
But in the interview, Flaherty argued those statistics can be misleading. That’s because they don’t take into account the fact that some Canadians build wealth in ways that don’t show up in surveys of retirement savings plans.
“Canadians also build up equity in their homes and that’s another way of saving for retirement,” he noted. “Canadians have equity in their farms, Canadians have equity in their businesses.
“So it’s not a simplistic kind of issue,” he argued. “It’s an issue where we have to look at the whole picture.”
Alberta and British Columbia are urging Ottawa to forge a “pan-Canadian” solution that would see a supplementary layer added to the Canada Pension Plan.
Working Canadians would be automatically enrolled in the plan if they did not have a company pension, but they would be able to opt out.
The Western provinces have said they will go their own way if Ottawa doesn’t sign on.
Flaherty did not dismiss their option, but chose to focus his comments on the abilities of the Canadian financial services sector to provide solutions, with the right tax incentives from government.
“We sure want to listen to the private sector—the financial institutions. Not only the banks but the life companies,” he stressed.
“You know, we have some of the strongest banks in the world.”