Enhancing pension coverage in Canada is critical, and the private sector could play an important role in achieving this, said Dean Connor, president of Sun Life Financial Canada, on Tuesday.

Connor, who spoke about pension reform at the Vancouver Board of Trade, noted that three to five million Canadians — or one in five workers — are either not covered by a pension plan, or are not saving enough on their own.

“We need to close the coverage gap and we need to find ways to deliver not lump sums, but lifetime income at retirement,” Connor said.

But he warned that establishing a new layer of government-sponsored pension agencies would not solve the problem.

“Our approach requires simple changes to pension law and leverages the scale, expertise and prudence of Canada’s insurance industry,” Connor said.

He calls for simplified regulation that will ultimately reduce the cost of operating pension plans and free up more money for pensions. In addition, Connor urges federal and provincial governments to help create solutions that will make pensions more affordable for employers and their workers.

A specific change that could help bridge the pension gap includes allowing the establishment of multi-employer plans to allow non-affiliated employers and the self-employed to aggregate into a single plan and benefit from economies of scale. In addition, Connor calls for the auto-enrollment of employees into pension plans and group RRSPs, with the ability to opt out.

“Taken together, these two changes — multi-employer plans and auto enrollment — will go a long way to filling the adequacy gap,” Connor said.

He also made a recommendation with respect to defined-contribution plans: the introduction of a high annual contribution limit, governed by an overall lifetime allowance. This change would level the playing field between defined-benefit and DC plans in terms of tax deductions, according to Connor.

Connor also lauded the British Columbia government for taking a leadership role on pension reform. But he also cautioned that the plan proposed by the B.C. government — the creation of a government-initiated supplementary DC pension plan — has important disadvantages.

For example, Connor considers the plan too paternalistic: “Our government, through this type of National Pension Agency, would be limiting what we can invest in, presumably because we have to protect Canadians against themselves,”

Connor argued that the private sector could run a more cost-effective system than the public sector.

“Private sector providers do have the tools to get the job done,” he said. “They are also motivated to compete, to innovate and drive down costs and improve productivity.”