Conservatives cave to banks and insurance companies on pension reform

StarBuzz Weekly, Toronto-July 20, 2011-NORTH YORK— The Conservative government is opting for pension reform that will ensure that banks and insurance companies reap the maximum benefit while Canadian workers continue to get left behind, says Judy Sgro, Liberal critic for seniors and pension.

“After promising pension reform for four years the Conservatives have decided to go the easy route and just let investment fund managers offer a new type of savings plan to workers,” said Sgro.  “The basic idea behind the Conservative’s pooled pension plan is to create another vehicle that will allow banks to chip away at the nest eggs of Canadians with their high management fees.”


Canadians pay some of the highest management fees in the world on their mutual funds.  Morningstar recently released a report grading 22 countries on the Management Expense Ratios levied on their mutual funds.  Canada was the only country to receive an F.

“There is a better, low cost, high return, universal option that is trusted by Canadians from coast to coast to coast and that is to create a voluntary supplemental Canada Pension Plan,” said Sgro.   “A voluntary CPP would have the benefit of not imposing the plan on workers who don’t need the extra coverage, which the Conservatives like, and provide the security and ease of use that the NDP likes.  Most importantly it is the only vehicle that will deliver the results that Canadians want and need.”

Australia introduced a superannuation system similar to the Conservative’s Register Pooled Pension Plan proposal in 1997.  A recent study published in the Rotman International Journal of Pension Management found that:

The Australian superannuation system was founded on the assumption that market competition will deliver economic efficiency in a largely private defined contribution system... Total assets in the system have grown substantially through contributions, but net earnings from investments were relatively low.  Despite the presumed role of competition, the investment performance of the system continued to be restrained by high fees and costs.

“Over their first twelve years Australia’s pooled pension funds posted a disappointing $161 billion in net investment earnings largely because plan providers scooped up a generous $105 billion in fees,” said Sgro.  “Copying Australia by allowing the investment industry to eat up 39% of the growth in Canadians’ retirement plans would be disastrous for our country.”

“I think the Conservatives just want to be able to tax the high management fees of these pooled pensions with the GST or HST which they wouldn’t be able to do to a voluntary supplemental CPP,” said Sgro.  “They've decided to fill the coffers in Ottawa in order to fight the deficit they created rather than fuel the retirement dreams of their constituents.”