Author Description

Until now Canada's retirement income system has done well in alleviating elders' poverty and helping workers maintain their standard of living in retirement. But according to Patrik Marier, the latter achievement is threatened by problems in the coverage and governance of occupational pensions, and by the voluntary nature and high cost of savings alternatives. These issues, together with the limited generosity of public pension programs, mean that a significant proportion of today's middle-income earners could face a decline in their living standards when they retire. Patrik Marier looks at pension reforms in Norway, Sweden, New Zealand, the United Kingdom and Saskatchewan to determine if there are lessons for Canada, and finds that all five systems have features that would complement Canada's public pensions. Norway mandated employers to top up its generous pay-as-you-go, public, earnings-related scheme with modest occupational pension coverage. Small businesses addressed the challenges this measure posed by forming a partnership between their national organization and an insurance company. About 600,000 workers gained new occupational coverage at a low cost to the state. Sweden expanded pension coverage by incorporating mandatory, modest, defined contribution (DC) individual pension accounts into its generous public scheme. New Zealand and the UK chose automatic enrolment with opt-out provisions for workers (employers must contribute if workers do). In 2006, New Zealand started enrolling new workers into DC individual pension accounts, and provided financial education and incentives. By mid-2010 coverage was achieved for 1.5 million individuals. By 2017 workers in the UK will be enrolled into either an occupational plan or a low-cost, DC, individual pension account, managed by an arm?s-length trust. Canada would face obstacles in adapting foreign solutions. For instance, pensions are a shared federal-provincial jurisdiction, and the business sector is less structu