TORONTO, Dec. 10 2009 – The introduction of multi-employer pension plans with automatic enrollment, automatic escalation and an opt-out clause would clearly address public interest issues involved in reform of Canada’s pension system, according to a senior executive in the financial services industry.
Speaking today to the Economic Club of Canada, Dean Connor, President, Sun Life Financial Canada, urged Finance Ministers attending a meeting in Whitehorse next week to endorse multi-employer pension plans as a solution for challenges facing Canada’s retirement savings and income system.
“Getting it right will ensure that future generations of Canadian retirees can spend their golden years in security, comfort and dignity,” Mr. Connor said.
In developing a solution, Mr. Connor suggested public interest criteria that the Finance Ministers should consider when implementing pension reforms. He said any plan should:
- Increase pension coverage for the 3.5 million middle-income private sector workers who lack coverage but need it, and should be a shared responsibility between individuals and government;
- Ensure that retirement income for Canadians is adequate and secure;
- Be affordable, sustainable and accessible to all Canadians;
- Ensure the plan is doable on a timely basis.
Mr. Connor said these public interest issues can best be addressed in three steps:
- Amend pension laws to allow non-affiliated employers and the self-employed to participate in large multi-employer pension plans;
- Require pension plans and Group RRSPs to auto-enroll employees, with an opt-out provision made available. Automatic escalation of contributions would also be allowed;
- Require employers to offer a Defined Contribution or Group RRSP plan, unless they specifically opt-out. If a plan is provided, employees would contribute and the employer could choose whether or not to contribute.
“Amending the rules to allow for multi-employer retirement plans and group RRSPs that can include the self-employed will make coverage accessible to millions of Canadian workers,” Mr. Connor said. “Auto-enrollment and automatic contribution escalation will ensure more Canadians take advantage of that coverage.”
These proposals are sustainable, cost-efficient and can be implemented on a timely basis to the benefit of all Canadians, Mr. Connor noted. “The proposals put forth today provide Canadians with the same features, the same options and benefits and the same quality of service, no matter where they reside.”
He also raised concerns about increasing the role of government through creation of provincially-run pension plans, or expanding the Canada Pension Plan to add a supplementary pension.
“Our proposal brings no additional risk or responsibility to government,” Mr. Connor said. “This spreading of risk is especially important at a time when all governments in Canada are in a long period of deficit financing on top of escalating health care costs.”
In addition, Mr. Connor warned against the introduction of a system of mandatory worker contributions.
“Reducing people’s choices is the wrong approach in today’s world. Auto-enrollment with an opt-out provision is the right approach,” he concluded. “It is the difference between a ‘nudge’ and a ‘shove’.”
About Sun Life Financial
Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of September 30, 2009, the Sun Life Financial group of companies had total assets under management of $412 billion. For more information please visit www.sunlife.com.
Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock exchanges under the ticker symbol SLF.