There must be more opportunities for Canadians to participate in pension plans, concludes a report released Thursday by Advocis, The Financial Advisors Association of Canada.

According to the report, the most effective way to encourage higher participation by Canadians is fostering employer-sponsored defined contribution (DC) pension plans.

“We are in the middle of a perfect storm. Only one-third of Canadian employees are in a pension plan and participation is declining. Canadians’ retirement savings will inadequately finance their retirement at a time when life expectancy is increasing,” says Greg Pollock, president and CEO of Advocis.

The report outlines how public policymakers can eliminate the barriers and create incentives for more employers to sponsor DC plans.

The report recommends:

• improving the regulatory environment for DC plans;
• harmonizing regulations between provinces and federally to reduce complexities and costs;
• mandatory enrolment for employees, with opting out provisions, as the default; and
• fostering simplicity and transparency in DC plans.

The report also recommends tax changes including:

• increasing the age limit for contributions from 71 to 73;
• determining contribution to retirement savings plans based on a life-time average, to take into account fluctuating incomes; and
• allowing past service contributions up to the limit of the employee’s unused RRSP contribution room, to make up for years with interrupted employment histories.

“Clearly, the message is something has to change. This report makes a significant contribution to an important dialogue on the pension crisis,” says Pollock. “Canadians need to have the tools to plan for their retirement.”

The report, Encouraging Small and Medium Sized Firms To Participate in Pension Plans, was commissioned by Advocis and co-authored by Professors Morley Gunderson and Thomas Wilson of the University of Toronto.

IE