Friday, October 30, 2009

You will recall that the Liberals "Forum on Pensions" was sponsored by this very Insurance lobby group. Sheesh.

Image: Frank Swedlove. President of the CLHIA and the CLHIA's logo that appeared on LIberal's Forum on Pensions that took place this week.

As evidence of how aligned the Liberal Party is with the life insurance industry, you will recall that the Liberal’s forum on pension reform was sponsored by the Canadian Life and Health Insurance Association [CLHIA] . Talk about a conflict of interest and an indication of the degree to which the Liberal Party has been co-opted by the insurance companies who have an agenda that is completely counter to the interests of virtually all Canadians, as evidenced by their role in destroying income trusts as a way of maintaining the status quo and killing their competition for Canadians’ retirement savings.

Now they want to do the same for Canada’s pension system by protecting the status quo. Wel of course they do, as that is what is in THEIR best interests, as opposed to Canadians' best interests. Same deal with income trusts and the life insuarace industry's insidious lobbying to kill that form of competition for Canadians' retirement savings.

Here is the insurance industry’s self interests exposed in today’s Financial Post. If Jonathan Chevreau of the Financail Post can figure it out and see through it then it’s clearly not beyond the comprehension of Liberal MPs:

Why insurance industry sees no need to reinvent pension wheel

October 29, 2009
by Jonathan_Chevreau
Financial Post

While the insurance industry clearly has its own unique perspective on pension reform, today's article in the Financial Post by Frank Swedlove [pictured] took a refreshingly no-nonsense line: New government pension plan not necessary.

Swedlove, who is president of the Canadian Life and Health Insurance Association [CLHIA] rightly observes that there's plenty to like about the existing retirement system: the workplace-funded Canada Pension Plan (CPP) is "recognized around the world as a successful universal DB [Defined Benefit] plan." Add to that the publicly funded Old Age Security and in the direst cases the Guaranteed Income Supplement to the OAS, and that's a pretty good base to build on. As Swedlove notes, the basic public pensions were never meant to be the only source of retirement income.

Even so, as Mercer actuary Malcolm Hamilton has noted, the combination of OAS and GIS plus some provincial mean-tested programs means a senior couple that "never worked a day in their life or saved a penny" could enjoy $20,000 a year in income, much of it tax free. The only catch is they have to get to age 65 to do so.

Clearly, most of us do work and it behooves us to "save a penny" and then some out of our working incomes.

As the ACPM noted in yesterday's blog, Canadians need to save more, whether in tax shelters like the RRSP or the new TFSAs or in so-called taxable or open investment accounts. If you do all of that PLUS you're a member of an employer-provided pension, arguably most should be in a position to retire comfortably some time between age 60 and 70.

10 billion reasons why Manulife and insurance companies like the status quo

So what's the insurance industry's agenda here? Nothing insidious but at some point they're going to do a gangbuster business selling annuities. And a type of variable annuity called the Guaranteed Minimum Withdrawal Benefit (GMWB) has also proved to be a boon to the industry: just three years after it launched its Income Plus, Manulife Financial has accumulated a whopping $10 billion in Income Plus. This is aimed at Canadians who don't have a proper employer-sponsored pension plan and especially not the old fashioned Defined Benefit plans that guarantee a set income for life. Another half dozen Canadian insurance companies are also selling similar products, including Canada Life, Sun Life and Desjardins Financial.

Swedlove refers to this but only obliquely near the end of the piece in the Post, when he says "Canada's life insurers already offer guaranteed income products that allow individuals to securely shift from asset accumulation into the retirement payout phase." These newer insurance products build on this, providing "potential market growth while guaranteeing a base level of income." Swedlove goes so far as to to declare they "combine the income security of traditional DB pensions with the predictable costs of DC plans."

As the boomers age, the industry will also sell plenty of life insurance, critical illness and long-term care insurance policies, much of this integral to the estate planning business and intergenerational transfer of wealth (first from the boomers' parents to the boomers, then from the boomers to the boomers' children).

Industry could also benefit from streamlined multi-employer plans for smaller employers

Where the CLHIA sees room for improvement in the status quo is the realm of multi-employer pensions. The CLHIA's Wendy Hope says the industry firmly believes the "fastest, most efficient and cost-effective" route would be for governments to streamline and simplify pension legislation to facilitate multi-employer pension plans or MEPs. This would be particularly effective for small and medium-sized businesses that may not have the scale to run their own pension plans.

And to whom would those smaller firms turn to cope with the "costs and compliance" burden? You guessed it: the life insurance companies!

Hope says MEPs are already available to some Canadians who work for more than one employer, such as construction trade workers. "All that would be required is to eliminate the current requirements for an employment relationship between the sponsoring institution and the plan members."

CPP top-up would be a mistake; some pension problems are unsolvable

Little wonder the CLHIA views a move to radical proposals like top-ups or supplements to the CPP as a "mistake." If this happened, it raises the spectre of a "monopoly" and "increased risks to the taxpaying public." In bad economic times, "there would be an expectation that governments will guarantee benefit levels if returns fall short. This could have major fiscal implications in the future and create inequities relative to participants in other plans."

And what of the aforementioned Malcolm Hamilton [pictured right], who was unavailable the day Finance Minister Jim Flaherty issued the proposed tweaks to employer pensions? Here's his brief e-mail to me:

"From what I saw he did well...but many of the problems that people are complaining about are not solvable problems and there isn't much he can do about those."

1 comment:

Dr Mike said...

So big business thinks it is their job to keep me in bucks when I retire by offering me minimal monthly payouts from their insurance products.

But what if I would rather look after myself , earn my own investment income from the products of my choosing.

Tough noogies Dr Mike , you buy our stuff or else---look how easy it was to get rid of those damned income trusts---just one word to the powers-at-be , aka Msrs Harper & Flaherty , & poof they were gone--Happy Halloween.

We know the Cons are on-board with the big insurers , the Liberals appear to be sitting right next to them , the Dippers are only interested in the Union stiffs , the Bloc will do us no good here in Ontario & the Green are still non-existent.

So where does that leave us guys on the street??

Screwed again.

Dr Mike Popovich