The financial services industry can’t be all things to all people. Policy-makers recognize that fact; it’s time that the industry did, too.

The standing Senate committee on banking, trade and commerce recently unveiled recommendations for reform to the retirement savings system, highlighted by the proposition that the federal government work with the provinces to create a new, voluntary national pension plan.

The plan — intended to serve middle-class workers who don’t have occupational pension plans, self-employed workers and those that have lousy pension plans — has much to recommend it. For one thing, it recognizes that costs matter. There’s no getting around the fact that scale makes a big difference when it comes to saving. Large pension plans pay a handful of basis points for money management, whereas individuals who invest on their own are likely to face costs at least five times greater; which, of course, creates a commensurate obstacle to returns.

The plan would also include automatic enrolment, taking account of the by now familiar bias that has been uncovered by behavioural economists: that this sort of default setting encourages prudent behaviour. Yet the plan would still be voluntary, leaving ample room for individual choice. Indeed, recognizing the continued importance of private savings, the committee’s report also calls for some reform to the existing tax-assisted savings vehicles — RRSPs and tax-free savings accounts — that would make them more flexible.

There’s a growing realization among policy-makers that too many Canadians haven’t saved enough for retirement. As a result, many are going to face either longer working lives or lowered expectations when it comes to retirement lifestyles. Even with these reforms, many Canadians may still face these sorts of choices as the economy’s growth potential shrinks and the pressures of demographic change take hold.

The financial services industry may not welcome the competition from another public pension plan, but policy makers can’t afford to let households go underprovisioned for retirement. If the industry doesn’t like it, it should set to work on building a better mousetrap.