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April 09, 2021

Looming retirement crisis a major problem, employers say

Disappearing pensions have been a hot topic lately. 

Thanks to the bankruptcies of high-profile corporations like Nortel Networks and AbitibiBowater, which have left massive underfunded pension liabilities in their wake, a great many Canadians aren’t going to see the pension they counted on.

So extensive is the damage that 68% of employers now admit that Canada is facing a retirement crisis, according to research released this week from benefits consultant Morneau Sobeco

When it comes to solutions, however, this group is evenly split between those who believe that responsibility lies with the government and those who feel that it’s up to businesses and individuals to take more action.

To help ease the crisis, companies are calling for new hybrid pension plans that could cover large portions of the population.

33% favour a new additional fund that would sit on top of the Canada Pension Plan. The model being floated is some combination of a defined-benefit plan, which guarantees a certain pension amount, and group RRSP plans, in which the employer and employees share the funding risk.

Other potential steps favoured by the employers include expansion of the CPP itself (29%); increasing the retirement age for all government pensions (11%), and lastly, changing the rules governing pension surpluses, a key source of conflict between labour and corporate Canada (28%). 

Currently, employers are obliged to fund pension deficits, yet aren’t generally permitted to access surplus monies in the plan when investment performance is strong.

Despite dire warnings like this, one of the country's most outspoken actuaries says the problem may not really be that bad.

"It’s a truth universally acknowledged that Canada has one of the best retirement systems in the world,"  Malcolm Hamilton, an actuary at Mercer Human Resource Consulting and an expert on Canadian retirement saving, told a recent pension conference.

Hamilton points out the current retirement system poses problems for a relatively small number of Canadians — those in the private sector, middle aged, and with above-average incomes. Reforms to Canada's pension system need to focus on these affected groups, as broad-based reforms are neither needed nor affordable, he maintains. 

Looking ahead, which solution best addresses your needs? Or do you even have any sort of pension to begin with?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo),,, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...