“Jack Mintz: Beware of the super pension fund” -NOT

Jack Mintz is wrong on each and every point in his above titled article in April 21^st FP!

NOT “immediate need is to soften insolvency regulations to reduce pressures on cash-constrained companies”; the need is to secure the obligations made to millions of Canadian pensioners. These obligations are nothing less than deferred wages.

NOT “dangerous new idea: a government-promoted multi-employer pension plan”; that is exactly what is needed, a vehicle where Canadians default to a portable/employer-independent, low-cost, professionally managed and tax-advantaged retirement savings vehicle

NOT “The “big is better” argument is fallaciously based on the notion that somehow people must be in a pension plan to accumulate savings for retirement purposes.”; bigger is cheaper due to scale and cheaper/cost is one of the few key determinants and controllable factors which influence the available assets after life-long accumulation for retirement. Canadian mutual funds with 2-3% management fees eat away about half the assets over a lifetime of working and saving. Large retiree pools also offer opportunity for low cost annuitization or longevity insurance options, not available to individuals or groups in a cost-effective manner today

NOT “RRSPs make sense in that they avoid unnecessary regulation compared to a pension plan” and NOT “The idea of having super pension plans implies there are cost savings due to economies scale. However, group RRSPs can achieve similar results”; history has shown that RRSPs are inadequate retirement asset accumulation vehicles due to: behavioural obstacles to adequate and systematic savings, investors choosing inappropriate asset allocations and the punishing management fees associated with available investment options.

NOT “By pushing for super pension funds that operate on a non-profit basis, the government is creating a non-taxable competitor who has a clear advantage over private companies”; private companies have failed to act as fiduciaries for retiree savings.

NOT “More worrisome is the potential implicit liability faced by governments.”; none of the proposals tabled by credible sources have even vaguely implied explicit or implicit government guarantees. The proposals were aimed at urgent need to address on one hand the systemic failure of Canada’s private sector DB pension system and on the other hand the failure of DC/RRSP-based system to enable Canadians to accumulate the necessary assets for retirement. The proposals were not defined benefit plans, but target benefit plans at best.

It’s time for Mr. Mintz to brush up on the disaster that the Canadian pension/retirement system has become. Perhaps he could then propose some solutions to the current crisis. In the meantime he can focus on accounting and tax matters that he is no doubt more familiar with.