National Post - Financial Post Magazine
BUST TO BOOM
ARE PENSION PESSIMISTS MAKING FINANCING PROBLEM UP?
Politicians and economists like to scare Canadians into believing they’re not saving enough for retirement. Maybe, just maybe, they’re full of hot air.
BBernard Dussault is, in some ways, typical of many Canadians of retirement age. The former chief actuary of the Canada Pension Plan is 72, but that doesn’t mean he’s packed it in for the fairways of a golf course and a Florida condo. No, he’s still working as a consultant to The Professional Institute of the Public Service of Canada, and is keenly aware of the relationship Canadians have with their pensions. “I’m not going anywhere as long as I still enjoy it and there’s someone willing to pay me,” he says.
Dussault’s case is becoming more common. Each successive generation of Canadians has led healthier lives than their predecessors, allowing them to live and work longer and retire later, hopefully in a stable financial position. But it’s the latter point that has politicians, economists and the media trying to scare everyone. Investment firm AGF Management Ltd. recently released a survey reporting that 69% of Canadians were worried about their retirement savings. It is one of numerous surveys and polls conducted spelling out the doom and gloom facing Canadians in retirement. The polls say we don’t start saving early enough or budget appropriately for retirement, ideas that are picked up by politicians who use them as fuel for their own agendas.
“It is a crisis,” Ontario Premier Kathleen Wynne said while promoting her provincial pension plan on the election trail earlier this year. “It is a crisis that is confronting us and if we don’t deal with it now then we will be in trouble down the road.” But Wynne’s concern that Canadians, at least Ontarians, are not saving enough to look after themselves when their working days are done may be more sizzle than steak. Despite her gloomy outlook, many experts aren’t buying into it.
“I don’t know exactly where the headlines come from because there are really no data to back it up,” says Malcolm Hamilton, a retired pension actuary who works as a senior fellow at thinktank C.D. Howe Institute. “It doesn’t make any sense and it is a bit of a mystery, but it has been repeated enough that it has created a public perception there’s a problem. Only the numbers don’t show that to be the case.”
For one thing, some of the biggest pensions are in very good shape. For example, the Public Sector Pension Investment Board in August reported it now has $93.7 billion in assets after a 16.3% return. By 2035, the country’s fifth-largest pension fund will quadruple to $425 billion, when it expects to be paying out more than it takes in, but that certainly takes care of the boomers.
In Canada, it seems, saying we’re unprepared for retirement has become somewhat of a national pastime. “For myentire life I’ve been told my generation was spendthrift and lazy and would surely get its comeuppance when they retired,” Hamilton says. “But now we look at the boomers and say, ‘They were very lucky, but it is their children who will have a problem.’ That’s exactly what we read about the boomers 30 years ago.” That’s also the take of Jack Mintz, Palmer Chair in Public Policy at the University of Calgary. “The numbers are clear: Most Canadians have adequate replacement income for when they retire,” he says.
That doesn’t mean the debate over retirement and pensions is going away, especially