Royce Shook en Lifestyle, beBee in English, Healthy Living Workshop Facilitator • Cosco Health and Wellness Institute 18/8/2017 · 2 min de lectura · +100

The problem with pensions: symptoms and cures

This is an interesting perspective and one that should raise some discussion.  It is always interesting to see what those who serve the 1% believe. The issues as presented here are boomers are living too long, we don't have enough invested because of the market collapse in 2008, there are too many boomers retiring, and many of us do not have good or any pension plans.

The cures to this problem are simple,  shared risk pension plans that  are allowed to suspend benefits when the plan is in trouble, make people work longer by raising the retirement age, reform pension management structure to implement more shared risk plans into the mix, expand the Canada Pension plan for workers who earn between $30.000 and $100,000, pooling the savings of defined contribution plans. Some interesting ideas were presented

THE SYMPTOMS

Longevity: We are living too long. When Grand Trunk Railway introduced Canada’s first workplace pension in 1874, the retirement age was 70 and average life expectancy 55, meaning the average worker was dead for 15 years before they could collect a pension. Today the average Canadian worker is retiring at 63 and life expectancy is almost 80 years. As life expectancy rises, workers’retirement years will soon exceed their career years, meaning they will be spending far more than anticipated.

Investment volatility: In an era of threadbare interest rates, pension funds have shifted most of their assets from bonds to stock market investments to generate returns needed to foot the pension bill. The strategy exposes funds to the increasingly volatile whims of the market. In the wake of the dot.com collapse in 1991 and financial crisis of 2008, the average Canadian pension plan in Canada is about 12 per cent short of assets needed to pay their pension bills.

Lax pension management: Bonds currently pay investors a real rate of about 1 per cent, but a large number of pension plans continue to project they will earn annual returns of 4 per cent. 

Many funds also rely on outdated mortality tables, which means they are assuming retirees will die sooner than expected. Added up, these practices mean funds have not saved enough for plan members.

Demographics: We are on the verge of the largest workplace exodus in history with more than seven million workers, 42 per cent of the Canadian work force, set to retire over the next 20 years. 

Many have not saved enough for retirement. For those who have pension plans, the exodus means there may be as many workers as there are retirees, a ratio that may leave younger workers with a much smaller pension pie than their predecessors.

Inflexible pension plans: When defined benefit pension plans gained popularity aft