Morneau Sobeco recently released the results of a survey showing that 68 per cent of employers believe the country is facing a retirement crisis. The group is split evenly between employers who believe that responsibility for finding a solution lies with the government (34 per cent), and employers who feel that it is business and individuals who should be taking action (34 per cent).
Within occupational pension plans, the most popular action that the government could take is to facilitate the introduction of innovative, new hybrid pension plans. Thirty-three percent cited this as the most effective option. "Employers are acknowledging that traditional Defined Benefit (DB) plans may not be the answer since they expose companies to too much risk," says Fred Vettese, chief actuary of Morneau Sobeco. "But at the same time, they also see problems with Defined Contribution (DC) plans which put almost all of the risk on individuals. New hybrid solutions are needed."
Vettese further notes, "Mandatory plans are supported by 25 per cent of all respondents and 32 per cent of respondents under age 45 - quite a bit more than we expected. Until now, the idea of mandatory occupational plans has received very little attention."
Another potential solution to the crisis involves resolving surplus asymmetry (28 per cent). This relates to employers being obliged to fund deficits, yet not being permitted to access surplus when performance is strong. Other potential actions to solve the crisis include: a voluntary, Canada-wide DC plan (37 per cent); expansion of the Canada/Quebec Pension Plan (29 per cent); and lastly, increasing the retirement age for government pensions (11 per cent). "It is clear that Canadians do not want to retire later," says Vettese. "Any move to increase the retirement age under the Canada Pension Plan will be unpopular."
Morneau Sobeco Income Fund is the largest Canadian-owned firm providing human resources consulting and outsourcing services. The firm delivers solutions to assist employers in managing the financial security, health and productivity of their employees. With over 2,400 employees in offices across North America, Morneau Sobeco Income Fund offers its services to organizations in Canada, the U.S. and around the globe.