National pension proposal challenges labour
An obscure pension harmonization review, completed by British Columbia and Alberta just last November, has suddenly sparked a national debate on pension reform that is challenging Canada’s unions.
BC finance minister Colin Hansen emerged from an Aug. 1 meeting with his provincial counterparts with a unity agreement that clears the way for a national review of retirement incomes, including a proposal for a new national pension plan for private sector employers and employees.
A national plan was the key recommendation of Getting our Acts Together, the report of the Joint Expert Panel on Pension Standards created by Alberta and BC in 2007.
Although the joint panel, which included Vancouver pension law specialist Scott Sweatman as co-chair, urged a host of administrative and legal changes to harmonize BC and Alberta pension standards, it also called for national action to improve retirement income security.
With only 20 percent of private sector employees covered by a retirement plan, the panel said, it’s obvious most retirees will be far short of the minimum income they’ll require.
“The need for a cost-effective pension plan is clear,” they wrote, “not only to serve workers but also to address the anticipated need for an increase in capital available for infrastructure projects and ongoing capital investment in Canadian businesses.”
The panel proposed a national pension program, operated as a non-profit entity, in which private sector employers and employees would be automatically be registered, albeit with an opt-out provision. Risk would be pooled, costs reduced and coverage expanded in a “defined contribution” plan that linked benefits to contributions.
At a time when most employers are trying to “get out of the pension business,” they argued, such a program would provide a vital alternative to protect workers and help businesses.
The vision of a new national pension program resonated with employers and workers at a time when both balance sheets and private retirement savings were being savaged by the global economic crisis.
Initial labour reaction to the report tended to fixate on its roots in TILMA, the Trade, Investment and Labour Mobility Agreement between BC and Alberta. (TILMA, with its free trade philosophy, is an agreement the labour movement loves to hate.)
But Alberta Federation of Labour president Gil McGowan — one of the country’s most effective labour leaders despite his relative youth and his organization’s small size — took up the challenge of a national plan.
He commissioned PBI Actuarial Consultants, a Vancouver-based pension consulting firm, to assess the panel’s recommendations.
PBI agreed that “it is vital to increase the coverage of workers under pension plans,” but concluded the panel’s Alberta BC Plan, or ABC Plan, “will be unlikely to provide the income individuals need in retirement.”
The best approach, says McGowan, is a supplementary plan to the Canada Pension Plan, which would be mandatory for employers, easy to administer and provide better benefits. Such a national plan should be a “defined benefit” plan that provides a minimum level of support to all members.
McGowan garnered national coverage in June when he pursued western premiers to their meeting in Dawson City, Yukon, where he argued for a mandatory national plan.
The ABC plan is “at best an awkward Band-Aid solution,” he said, at time when “more and more people are starting to realize that if major policy changes aren’t initiated, significant numbers of Canadians – probably millions of them – will face the very real prospect of poverty in their old age.”
Canada’s labour movement, particularly the Canadian Labour Congress, has worked hard on the pension issue, which grabs the attention of rank-and-file convention delegates like few others. So far, however, labour has mostly been talking to itself.
That’s all changed with the release of the Joint Panel report, now being championed by BC’s Liberal government.
It sounds like McGowan and the panel agree on the disease, if not the cure. In times like these, that’s a win.