Pension regulations must be adjusted and modernized to address the looming retirement income crisis, speakers at a pension conference said on Wednesday. But industry experts are sharply divided on the most appropriate reform options for Canada’s pension system.

Speakers debated a variety of options at the Conference Board of Canada’s Summit on the Future of Pensions in Toronto.

Defined benefit pension plans should be a major part of the solution, according to John Crocker, president and CEO of the Healthcare of Ontario Pension Plan. He said DB plans are the most effective vehicles for providing retirees with sufficient income, and are being overlooked and prematurely dismissed as a potential solution.

“My experience with HOOPP has convinced me that defined benefit plans are viable, affordable, and must be an integral part of providing retirement income security for Canadians,” Crocker said.

He urged the government to allow the creation of large multi-employer defined benefit pension plans in the private sector, which could serve more Canadians. Crocker also urged policymakers to make the rules and requirements around DB plans less onerous for sponsors.

Both Registered Retirement Savings Plans and defined contribution plans, Crocker argued, fail to generate enough savings for Canadians to meet their goals in retirement.

But other speakers at the conference said the industry is inevitably moving towards defined contribution and capital accumulation plans, and argued that the regulatory environment should reflect this reality.

High costs and stringent rules and requirements around DB plans are driving employers towards DC plans, said Michael Boychuk, president and CEO of BIMCOR Inc., which manages BCE Inc.’s pension fund.

“There’s a real strong movement to go to the DC side of the world,” he said, adding that these vehicles should be embraced as a key part of the retirement system.

Bill Kyle, senior vice-president of group retirement services at The Great-West Life Assurance Company, agreed that the migration to DC plans is set to continue. He noted that between 2000 and 2008, DC plan assets surged by 70%.

Kyle recommended changes to pension regulations that maximize the utilization and effectiveness of these plans. For instance, regulations could mandate the automatic enrollment of workers in workplace pensions and set specified minimum contribution levels, in order to increase pension coverage and adequacy.

This type of reform would be affordable since the private sector pension plan infrastructure already exists, Kyle added.

“Implementation could be quite simple, and result in meaningful, immediate improvements to both access to coverage and benefit adequacy,” he said.

Pension guru Keith Ambachtsheer, director of the Rotman International Centre for Pension Management at the University of Toronto, highlighted his recommendation for the creation of a national pension plan that would supplement the Canada Pension Plan, automatically enrolling all workers without a pension plan.

He argued that large pension plans are a much more cost-effective approach to retirement savings than individual retail savings vehicles such as RRSPs. According to Ambachtsheer, wholesale investment management fees average 0.4%, compared to average fees of 1.6% for retail investment management products.

“We have this dichotomy between the wholesale sector and the retail sector that we really need to address,” Ambachtsheer said.

He agreed with the other speakers on the need for changes to pension regulations.

“We need to simplify and modernize the current pension rules and regulations,” he said. “This is the 21st century, and they should reflect that.”

IE