Wednesday, 29 April 2009

Pension Issue Now on the Table at Last

One of the silver linings from the slide into oblivion of GM and Chrysler is that the issue of pensions may finally be moving to be a front and centre public policy issue. The auto unions have been agitating for a rescue of their pensions but the online comment reaction to the Toronto Star editorial of April 25 on pensions shows that there is a high level of passion and opposition to the idea of guaranteeing / bailing out auto union pensions. Everyone is yelling "what about me and my (sometimes non-existent) pension?" A simple government/taxpayer handout cannot and will not happen.

Fundamental pension reform needs to happen and the sooner the better. Governments need to lead the creation of a single national solution (in the process getting rid of one area of needless provincial duplication and variation). A good place to start are proposals like the Universal Pension Plan discussed on the Wealthy Boomer blog, the Canada Supplementary Pension Plan of Keith Ambachtsheer on the CD Howe Institute website, or Peter Benedek's Pension Reform paper on his Retirement Action website.

One thing I know for sure is that some form of pension system providing a decent minimum retirement income needs to come about. I spend a lot of time acquiring knowledge about investments, diversification, asset allocation, risk management, international investing, longevity estimation, taxes, annuities, RRSPs, LIRAs, TFSAs to plan my own retirement income and it is darn complicated to plan properly. How could everyone do that? A simple, mandatory, fair, equitable, well-managed, self-funding system that removes much of this planning burden and attains economies of scale is required. The CPP seems to be quite successful along those lines so there's no reason it cannot be done again.

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