Jun 5: BEST FROM THE BLOGOSPHERE

June 5, 2023

More Canadians need access to better pensions: Ambachtsheer

Writing in The Globe and Mail, noted pension expert Keith Ambachtsheer says our ever-growing senior population would be better served if they — and the rest of us — had access to better workplace pensions.

He notes that Canada’s retirement system is ranked 11^th out of 44 countries via the Mercer CFA Institute Global Pension Index. What’s needed to boost that ranking, Ambachtsheer contends, is to make the type of pension plans that public sector workers have widely available to the rest of the population.

“Canada,” he writes, already has “one of the best occupational pension systems in the world for its public-sector workers. Globally admired as `the Canadian pension-fund model,’ it efficiently converts regular contributions into lifetime retirement income streams for its public-sector members. At the same time, investment organizations using the model are at the leading edge of converting retirement savings into sustainable, wealth-producing capital. This system needs to be expanded to everyone else.”

The number of senior citizens, he observes, is on the rise. Citing Peter Drucker’s 1976 book The Unseen Revolution, Ambachtsheer notes that the author foresaw “the young, outsized baby boomer generation of the 1970s eventually becoming an outsized generation of retirees, and advocated creating pension organizations with two key features: legitimacy and effectiveness.”

Ambachtsheer lists governance as an important attribute of the most effective pension plans. “Pension arrangements must be structured to always act in the best interests of the plan risk-bearers,” he explains.

The plans should ideally “have an accumulation pool that focuses on investment return generation, and a separate decumulation pool that provides lifetime income.” You contribute to the investment pool during your working life and receive benefits from the decumulation side when you retire, he explains.

The Canadian model pension plans also feature cost-effective management and “value-adding investment programs that turn retirement savings into wealth-producing capital,” writes Ambachtsheer. Another feature is the ability to provide lifetime pensions to plan members, he adds.

So how do we go from what we have now — a situation where there are many workers without any sort of retirement program at work — to one where most of us are in a Canadian model plan? Ambachtsheer sees three ways to achieve this change.

First, “existing Canadian pension-fund model organizations” could “offer their pension management infrastructure to private sector employers,” he notes. This is already being done by a few larger pension funds, such as Ontario’s Colleges of Applied Arts & Technology Pension Plan (CAAT).

Save with SPP interviewed CAAT’s Derek Dobson on this topic a few years ago.

Another approach would be to have “a government entity decide to create a Canadian pension-fund model organization for private-sector workers and retirees,” an idea that has worked in some U.S. states and in Great Britain, he writes.

Finally, he suggests that the private sector create “one or more new Canadian model offerings,” making better pension plans available to the private sector. He writes that Common Wealth and Purpose Investments offer programs that provide end-to-end coverage, including lifetime pensions.

Our own Saskatchewan Pension Plan, which is open to any Canadian with available registered retirement savings plan (RRSP) room, already has some of the Canadian model features — investments are pooled, professionally managed and governed at a low cost. SPP offers, through its annuity features, a lifetime pension for its members. If you don’t have a pension plan at work, you can join SPP as an individual — or, if you are an employer, you can look into offering it as a pension for your employees. Check out SPP today!

Great news — the savings opportunities with SPP are now limitless! You can transfer any amount you want into SPP from an RRSP, and you can make contributions based on your entire available RRSP room. It’s a great way to build your SPP retirement nest egg more quickly!

Join the Wealthcare Revolution – follow SPP on Facebook!

CAAT, Derek Dobson, Mercer CFA Institute Global Pension Index, Ontario’s Colleges of Applied Arts & Technology Pension Plan, Peter Drucker, Registered Retirement Savings Plan, RRSP, The Globe and Mail, The Unseen Revolution

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