Source: The Canadian Press

Ontario’s finance minister says the province’s multimillion-dollar top-up to the Pension Benefits Guarantee Fund was not an ideal solution to the pension crisis.

But Dwight Duncan says the alternative — a significant loss of retirement security for thousands of Ontario seniors — would have been worse.

The government announced the $500-million top-up in its March budget to help the fund deal with a soaring number of insolvent pensions, including a big one involving Nortel.

The guarantee, which is supposed to be fully funded by corporate contributions, provides beneficiaries of Ontario’s private pensions with up to $1,000 a month in the event a pension plan fails to provide its full benefits, or any at all.

The minister says the government’s next stage of pension modernization will come later this year, including two pension reform bills to be introduced in the legislature.

The minister will also meet with his provincial counterparts in June to discuss retirement income security for Canadians.

Governments and the business world are struggling to head off a potential future pension crisis stemming from an aging workforce that is not putting aside enough for retirement and losses in many pension plans because of volatile stock markets.

Many plans are in deficit and don’t have enough assets built up to pay future retirement benefits to their plan members.

Federal Finance Minister Jim Flaherty has been holding public hearings and town halls across Canada to discuss options to improve the pension system and has heard proposals ranging from expanding the Canada Pension Plan to introducing new flexible corporate plans.

Alberta Finance Minister Ted Morton said his province would rather see an “incremental” approach that would allow governments make a few regulatory changes to give financial institutions more leeway to encourage people to save..

On Wednesday, the left-leaning Canadian Centre for Policy Alternatives issued a report saying that expanding the CPP would be the most effective way to ensure all Canadian have adequate retirement incomes.

“There is now widespread concern that unless changes are made, a significant number of workers will reach retirement age without sufficient income to support themselves,” said pension expert Monica Townson, a research associate with the think tank.

Townson said only 38% of workers have a corporate pension plan and private savings through RRSPs are inadequate, with the average amount held in RRSPs by people aged 55-64 is estimated at only about $55,000.

“Expanding the CPP, whether by increasing the replacement rate or increasing the level of covered earnings, or both, would address the issue of coverage, security of benefits, and low cost of administration — all the key objectives of pension reform,” Townson said in her report.