Canada Launches Pension Consultations

Please read my latest entry and post your comments here:

http://pensionpulse.blogspot.com/2010/03/canada-launches-pension-consultations.html

Thank you,

Leo Kolivakis

Publisher of Pension Pulse blog.

Comments

[wpw]

Thanks for doing this Leo.   These are very important issues which unfortunately are being overlooked.  

I am not sure I entirely share your enthusiam for expanding public pensions at the expense of private pensions.  Certainly the rules around the management of private pensions, particularly regarding bankruptcy, need to be changed.   But that can still be done privately.

I do think there is some need for expanded public pensions at the lower middle-income level in Canada, despite what Jack Mintz tried to tell us.  

One thing that does concern me is the apparent "empire building" at some of the larger public sector employee funds.   I wonder if they are not going beyond their mandate.  Should the additional risks some of these funds are taking on backfire, it is the taxpayer who will have to bail them out.  

[Leo Kolivakis]

Was speaking to someone this morning about private pension plans, and shared some thoughts with him. Basically, in good years, companies used any gains in pensions to pad their earnings, but in bad years, pensions became a nightmare because companies had to pay into them. That's why most big companies scrapped their DB plans and shifted them over to DC plans, placing the burden on individuals.

Why not leave companies focused on their core business and leave the management of pensions to a group of professional money managers on the public side who can invest internally and externally to private funds? By pooling all these assets from private and rolling up other assets from municipal, and other public sector organizations, you can create several large public pensions in charge of delivering low cost pensions to more individuals.

Of course, you need to drastically improve governance at these public pensions or else you risk having nasty surprises. We talked about the Dutch model of public pensions and how they're doing it there.

I truly believe Canada can become a global leader on pensions, but there is a lot of work that needs to be done, and I am not sure the political will is there for major pension reforms.

[wpw]

If we look at the GM and especially the Nortel experiences (and the old Conrad Black Dominion experience) it is pretty clear to me pensions should be separated from the operations of a company.   I am not so sure it needs to be publicly managed, as a good network of privately managed and flexible pension funds could conceivably work well.

Of course it all comes down to governance and oversight.  To me this is much more important than whether a fund is privately or publicly managed.   If there is not oversight from those who understand risk and have the clout to do something about it, then it will not matter who is managing the fund.

I have some doubts about the desirability of huge public funds.  Besides their assembling huge market and political clout, they become magnets for the attention of those in both the financial and political worlds who can gain some special benefit from them.  

[Rick64]

 I am not very knowledgeable about pension plans and investment, but I wonder how they have performed on a worldwide basis. Maybe you could assess the best and the laws that governed them. Then come up with a viable solution or maybe you already have.

[Leo Kolivakis]

Let me ask you a few questions:

1) Should companies be in the business of pensions? Should we scrap private pension plans?

2) Can we bolster public pension plans so they deliver on the pension promise in a safe manner without taking stupid risks?

3) Should pensions be a fundamental human right, much like health care? Shouldn't people have the security and peace of mind that they can retire in dignity?

[Eally Ucked]

ad 1) companies are not in business of pensions, they hire professionals to do it. The idea to offer workers pension instead of cash was simple - "we tell them that we invest x amount of dollars in their pension, but we really just invest lets say 60% of it and the rest will be made up by geniuses of financial managment this way we save 40%". Just scam! Now they want to pull out of it without compensating workers.

ad 2) who will manage those, the same profesionals as for private plans? How you prevent government from deeping into those funds?

ad 3) yes, but as you will see shortly that health care will deteriorate to compensate for losses in banks, auto industry and other bailouts. 

[Bear]

Leo ... I will be very interested in what you tell them ... keep us posted

[jimmyjames]

Everytime Governments try to "fix" something-you just know the outcome-is not in your best interest--

Will follow this and see what happens--

Thanks for the heads up Leo--

[geminiRX]

I think raising interest rates is uhhh...step 1. Government morons. Why would sheeple save when they can get all this free debt ...er money at record low rates. I'm afraid sheeple are heading to slaughter soon.