The financial services sector should seize the opportunity that government-led pension reform efforts represent and come up with an innovative workplace pension program of its own, argue pension expert Keith Ambachtsheer and securities lawyer Ed Waitzer, in a new paper.

Specifically, Ambachtsheer, president of Toronto-based KPA Advisory Services Ltd., and Waitzer, senior partner with Stikeman Elliott LLP and the Ontario Securities Commission’s (OSC) former chairman, propose in their paper that the financial services sector develop workplace pension alternatives to compete with the planned Ontario Retirement Pension Plan (ORPP). The ORPP, which is slated to launch in 2018, will require employers to either enrol their workers in the new provincial plan or a “comparable plan.”

“If properly executed, offering employers and their employees an alternative to the ORPP will foster healthy competition and innovation, and should therefore be seen to be in the public interest,” the paper states, adding that governments should welcome such innovation from the private sector.

The paper suggests that private plans could compete with the ORPP with innovative design features, such as: allowing for higher target benefits and contribution rates; guarding against wealth transfers between different generations of workers; the ability to incorporate existing savings into the plan; and the proven delivery capabilities of large financial services institutions, such as banks and insurers, to handle investment, benefit administration, and client/member communications.

“Surely, employers and their employees would benefit from being able to choose between the ORPP and a [private plan],” the paper states. “Creating this choice would foster the kind of practical innovation in pension design and management that Canada needs.”

In addition, Ambachtsheer and Waitzer suggest in their paper that this represents an opportunity for the financial services industry to demonstrate its social utility: “There is a pressing need to re-assert and promote public awareness of the ability of the financial sector to promote social well-being … there are in fact extraordinary opportunities for the sector to develop (and better explain) products, services and markets that address a pressing social (and economic) need.”

The paper also adds that “Leadership by policy-makers and financial institutions can help demonstrate that financial regulation and services are about more than protecting consumers from deceptive products and practices. Rather, it should be to ensure that society is well served and that consumers get ‘value for money’ – a fair deal. This should encourage increased financial innovation (as a substitute for government intervention in markets) and a better articulation of public stewardship responsibilities throughout the financial services supply chain.”

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