Ontario Position on Retirement Income System Reform
Minister Duncan's letter to Federal, Provincial and Territorial Finance Ministers
June 10, 2010
Prior to the June 13 – 14, 2010 finance ministers meeting in Morell, Prince Edward Island, Finance Minister Dwight Duncan communicated Ontario's position on retirement income system reform in a letter to federal, provincial, and territorial finance ministers. The text of this June 10th, 2010 letter is posted below in the English and French versions.
In the lead-up to the upcoming Finance Ministers' meeting in Prince Edward Island, I wanted to take the opportunity to communicate with you about Ontario's position on strengthening Canada's retirement income system. I have appreciated the opportunity to work together constructively on this important issue, and trust we will continue to have the opportunity to do so in PEI and in the months beyond.
I have become increasingly concerned, especially since the global economic downturn, that many Canadians are not saving adequately for retirement. Recent research, policy work, and public consultations have confirmed that although our retirement income system has many strengths, a significant minority of Canadians in the future are likely to experience a material decrease in their standard of living upon retirement unless changes are made.
Ontario supports a pan-Canadian approach to the reform that will provide tomorrow's seniors with better, lower-cost tools to maintain their standard of living in retirement. Reforms should build upon the strengths and institutions of the existing retirement income system, which has significantly reduced poverty among seniors and currently allows most Canadians to maintain a similar standard of living before and after retirement.
Ontario supports a multi-pronged approach to reform that would strengthen both the second and third pillars of the system.
First, I believe we can make regulatory changes to harness Canada's world leading private-sector expertise, including financial institutions and others, to provide more efficient, lower-cost retirement options. Current tax and pension rules say that defined-contribution pension plans can only be offered where there is an employment relationship. This limits the retirement savings options available to the self-employed and those who work for small businesses. By changing these laws, we can expand the range of people who can set up pension plans, and the range of people who can access them. We could allow large, multi-employer defined contribution pension plans with low administrative costs to provide portable coverage to more Canadians.
Second, I believe we should seriously consider building on the strengths of the CPP through a phased-in, moderate increase to retirement and survivor benefits. CPP's guaranteed benefits are secure, inflation-indexed, and portable. The average CPP benefit is about $6,000 per year and the maximum is about $11,000 per year – lower than the public employment-related pensions of most other similar countries. Any improvements would have to be pre-funded, intergenerationally equitable, and affordable for working people and employers.
Ontario, like many other jurisdictions, is also modernizing the legislative framework for existing defined benefit pension plans and looking at ways to foster innovation in the future. We would welcome opportunities to work together to strengthen this important component of the retirement income system and improve the regulation of these plans across jurisdictions.