Canadians, according to research, want the kind of retirement security provided by a defined benefit pension plan, and they are willing to pay for it.
Employers also enjoy the benefits of a traditional pension through the recruitment and retention value the model provides. And the stable income delivered to retirees contributes to the economic health of communities, as DB pensioners remain consumers.
Despite these proven benefits, employers, mostly in the private sector, have been moving away from pensions for decades, usually switching to defined contribution schemes or not offering any type of occupational retirement plan at all. Recent data shows that as many as 65 per cent of Canadians don’t have access to a workplace pension.
It’s a conundrum, a problem in search of a solution.
The folks at the CAAT Pension Plan believe they an answer that addresses employer concerns over the commitments of offering employees the DB value, and the desire of Canadians for retirement income security. It involves opening the door to more employers, including those in the private sector, to the CAAT plan.
As shown by the World Bank report, authored by Common Wealth, and the Brookings Institution session, there is a growing interest in the Canadian model. Key to the success of that model in delivering the pension promise is a focus on results for members, says Mazer.
“I think the key thing is having different stakeholders working together in a way that serves the interests of members, and where everybody’s incentives are aligned around serving those interests.”
This happens in a variety of ways, he adds, including good governance, internal professional teams, and a regulatory environment that trusts the plans’ governance structures. That trust did not “happen overnight, it had to be built over time … through the performance and continued improvement of these plans.”
With a lot of retirement arrangements around the world, incentives are aligned around the interests of the shareholders or the companies that are delivering the retirement product, not around the interests of the members, says Mazer.
“And you get outcomes that are much, much worse for the members and much, much better for the shareholders … at the end of the day it’s those incentives that really make the difference in the Canadian model.”