Pension structure must be changed, not fixed: committee chair

Quebec’s pension structure is like a three-storey house, says Alban D’Amours, who chaired a committee of experts named by the previous Liberal government to look into the funding difficulties of pension plans in the province.

And taking a 40-year perspective in its report, titled Innovate to Preserve Our Pension System, the D’Amours committee rejects mere renovation as a fix.

“We realized we have to innovate to get there,” D’Amours said Tuesday afternoon in a speech to Question Retraite, a pension-planning organization in Montreal.

The report, made public Wednesday, makes 20 recom- mendations. Without revealing what they are, D’Amours told his audience of pension planners that they constitute “the solution” to ensure Quebecers have a “realistic and sufficient” retirement income.

D’Amours said the initial mandate of his committee was to examine only “the third storey” of Quebec’s pension structure — definedbenefit pension plans, which are losing favour in the face of declining financial returns and as employers switch to defined-contribution plans.

A defined-benefit pension means the level of benefits — the amount paid out to retired workers — is predetermined, while defined contribution means the amount paid in is set but the level of benefits is not guaranteed.

About 35 per cent of Quebec workers have defined-benefit pensions and two-thirds of

“Quebec should and can innovate in pension planning.”

COMMITTEE CHAIR ALBAN D’AMOURS

them are in the public sector — essentially provincial and municipal employees.

“Very quickly, we realized we had to look at the whole house,” D’Amours said, and that explains why the committee, named in late 2011 with a deadline set for the end of 2012, needed an extension.

The second storey of Quebec’s pension structure is public-sector pensions, such as the Quebec Pension Plan.

D’Amours said the announced phasing-in of higher contributions by employers and employees will ensure the QPP can maintain the benefits it pays, and is proof Quebecers are prepared for pension changes.

“Young people, and I understand them, refuse to pay for the retirement of those who went before them, getting nothing in return,” he said.

The first storey of the Quebec pension house is savings, D’Amours said, and Quebecers do not save enough. In fact, two million Quebec workers have no company pension plan.

For those with a pension plan, the exceptional returns on financial markets of the 1990s have given way to lower interest rates and lower returns, forcing the Quebec government to intervene repeatedly to allow pension fund managers some breathing room.

In the long run, the present system cannot be fixed, D’Amours said.

“We must propose changes, and this is what we are doing,” he added. “We must innovate.” D’Amours said Quebec should not abandon definedbenefit pensions, proposing that they be offered to more members of the workforce.

“And we think it is possible,” he said.

The committee’s report is not a bill to be voted on by the National Assembly, but a “social choice,” he said.

D’Amours called for a debate on his report’s conclusions.

“Don’t react too quickly,” he suggested. “Take the time to reflect.

“Quebec should and can innovate in pension planning, as it has done in other domains,” D’Amours said.

“The conclusions of this debate can only be dictated by the needs of Quebec workers when they retire,” he said, adding that, after naming his committee, the government cannot ignore the future of Quebec’s retirement system.