The simple fix for pensions is to cook their books, the way these three stooges cooked the books on tax leakage.

MP to look at state of Canadians' retirement
'A Sense Of Urgency'

Paul Vieira, Financial Post
Published: Wednesday, February 25, 2009

As civil servants work toward pushing fiscal stimuli quickly out the door and setting terms to make credit readily available, Conservative MP Ted Menzies is preparing to deal with another financial albatross -- the country's pension system.

Mr. Menzies is in charge of a one-month cross-country public consultation tour that kicks off next month in Ottawa and ends on April 17 in Winnipeg to look into federal laws governing private pension plans.

In an interview, Mr. Menzies, who serves as parliamentary secretary to Jim Flaherty, the Finance Minister, said time is of the essence -- and that's why he's aiming to have a final report ready -- with recommendations and potential legislative changes -- before Parliament returns in September after its summer break.

"To me this is very critical," said Mr. Menzies, who represents the rural southwestern Alberta riding of Macleod. "There is a sense of urgency. This impacts all Canadians.

"We need to figure out whether what we are doing today -- with either defined-benefit [DB] or defined-contribution [DC] -- is the right way to go," he said.

"Do we need to look at new options?"

Pension experts don't believe the current regime works. James Pierlot, a pension analyst at Towers Perrin in Toronto, said Canada's pensions are divided into three classes: the upper, in which mostly public servants and some private-sector employees have robust DB pensions; the middle, with some pension coverage but not enough to finance retirement; and the bottom, which the majority of Canadians belong to because they have no pension plan and little if any retirement savings.

"The consultation needs to look at who's got a plan and enough savings for retirement, and who doesn't -- and focus on that latter group and address how to deal with the needs of that constituency," Mr. Pierlot said yesterday.

Prior to announcing the Menziesled pension tour, the Department of Finance issued a request in early January for proposed changes to its nearly 25-year-old pension laws.

Among items that the department wanted feedback on include the pension-surplus threshold, which limits plan managers to surpluses of no more than 10% of assets, and whether alternative designs -- besides DC and DB -- should be allowed.

Even though the consultation is limited to federally regulated private pension plans, Mr. Menzies said changes his report recommends are likely to be adopted by the provinces.

The stock-market slump, sending North American benchmark indices to decade-long lows, brought immediate attention to pension funding. Ottawa moved to double the amount of time, to 10 years from five, pension managers had to pay down the unfunded liability, or the amount a plan would be short if all its members cashed out.

Mr. Pierlot added the consultation should also tackle income-tax measures that discourage retirement savings. The system is currently unfair, he argued in a recent paper for the C. D. Howe Institute, because rules limit annual contributions to retirement savings vehicles; unnecessarily tie pension savings to employment and employment income; restrict the kinds of income that can be used for retirement saving; and discourage the creation of the kind of large, pooled pension arrangements in the private sector that work well for public-sector workers.

William Robson, president of the C. D. Howe think-tank and one of the country's top pension analysts, said he gives the government credit for taking on this task and is encouraged there is a tight time frame. Ottawa last contemplated changes to pension rules in 2005, but that fell by the wayside.

He is also encouraged that Ottawa is willing to allow alternative pension schemes, outside of the standard DB and DC models.

"There is a tendency among policymakers to ignore the plight of the majority," Mr. Robson said, in reference to the self-employed and private-sector workers with no pension coverage.