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Head of Ontario Teachers Pension Plan calls for National Pension Reform Summit
Toronto (3 June 2008) – Canada needs a national summit to reform our retirement savings system, according to the retired Chief Executive Officer of one of Canada's largest pension plans, Claude Lamoureux.
Lamoureux, who is now a Special Advisor to the Canadian Institute of Actuaries, called on the federal Finance Minister to convene a national meeting of ministers responsible for pensions in November 2008. The summit would address a range of pension issues, including the steady decline of defined benefit pension plans.
"One-third of working Canadians have no retirement savings at all. A good many of the other two-thirds are not saving enough to fund an independent retirement. Yet despite their many advantages as a retirement savings vehicle for Canadians, defined benefit plans continue to decline while governments stand by watching them disappear," said Lamoureux, who recently retired as President and CEO of the Ontario Teachers' Pension Plan.
"I am deeply concerned that eventually Canadians will no longer have access to defined benefit pension plans. This would be a terrible loss of an attractive, efficient and reliable retirement savings vehicle and an important pillar of Canada's pension system," Lamoureux added.
In his remarks, Lamoureux listed the advantages of defined benefit plans compared with the other common workplace pension vehicle, defined contribution plans. "Defined benefit plans," said Lamoureux, "provide greater predictability to plan members, help to attract and retain employees for plan sponsors, and deliver better investment returns. They also offer a stable pool of capital to finance long-term investment projects that bring social and economic benefits for Canadians."
Lamoureux expressed his support for three proposals made by the Canadian Institute of Actuaries to help turn around the decline of defined benefit pension plans.
Pass legislation to allow the establishment of pension security trusts fully funded by the plan sponsor. Contributions to the trust would be separate from, but complementary to, regular plan funds. Trust surpluses not needed to meet pension commitments could be returned to the plan sponsor.
Pass legislation requiring defined benefit pension plans to set a target solvency margin. Contribution holidays would be allowed only if the plan's surplus exceeded the target solvency margin.
Change federal tax laws to allow plan sponsors to develop surpluses much greater than the current 10 percent limit. This change would improve the security of benefits for plan members.
Noting that currently only four finance ministers in Canada have responsibility for pensions, Lamoureux urged that ministers responsible for pensions begin to harmonize their efforts and start a dialogue on developing a national agenda for pension reform.
In calling on federal Finance Minister Jim Flaherty to launch a national pension reform summit, Lamoureux noted, "While there are no quick fixes for Canada's pension system, clearly it's time for governments to act decisively and start working together to bring about much needed reforms," Lamoureux said. "A national Pension Reform Summit is the first step along this road, one leading to a healthier retirement savings system and a brighter financial future for all Canadians."