If Canadians are looking to their employers for assurance they will enjoy a financially secure retirement, they'd better think again.
Executives who responded to the latest C-Suite survey say the pension system is in crisis, but corporations should not be expected to pick up the slack.
Indeed, fully 70 per cent said they feel that people working today will not have enough to live on in retirement.
And more than 80 per cent say that defined benefit plans - which provide a guaranteed pension that is most likely to provide a secure long-term retirement income - are no longer affordable for companies to fund. Less than a quarter of those say they are likely to increase contributions to their employees' plans in the next year.
The survey was conducted in mid-September for Report on Business and Business News Network by Toronto market research firm Gandalf Group. Top executives from 158 firms responded.
The pension gap is a huge dilemma, but the only solution is for individuals to take responsibility for their own retirement planning and saving, said William Anderson, CEO of Toronto-based First Nickel Inc. "A pension is a big deal," he said. "Many people have been let off the hook because they didn't have to worry about it. Well, life has changed."
After the kind of grim downturn in the markets that we've seen in the past year, the level of funding at some defined benefit plans "can be almost insurmountable," he said. That has prompted many companies with DB plans to consider their options, including a shift to a defined contribution plan - where the employer makes regular contributions but the pension level is not guaranteed.
Other reforms that could help prop up the pension system got support from a majority of the C-Suite respondents. More than two-thirds said tax breaks on corporate contributions to pension plans should be boosted, while almost that proportion said companies should have more time to make up DB shortfalls.
Despite the funding worries, very few companies with pension plans are planning to cut benefits to employees in the next year. More than 90 per cent of those who responded said they are unlikely to reduce benefits.
Bill Hammond, CEO of Guelph, Ont., transformer manufacturer Hammond Power Solutions Inc., said he would like to be able to boost his firm's pension contributions this year. His company has made payments to a defined contribution plan for its employees for many years, and has increased those contributions when times were good. "We recognized that we had to play a bigger role and we're trying to do so," Mr. Hammond said. At the same time, however, "I believe that companies should not be totally responsible for the retirement welfare of employees," he said.
The key is to ensure employees can take control of their financial future themselves, Mr. Hammond said. "Companies have a responsibility to make [employees]aware of what the other options are, and help educate them or at least connect them with investment services."
One option that did not gain favour from the C-Suite respondents was the proposal - floated in the past few months - that the federal or provincial governments start up an entirely new pension system for people who have no company plans. Fewer than a third of the respondents thought that was a good idea.
There's no reason for Ottawa or the provinces to get further into the pension business, said Leslie Herr, CEO of Empire Life Insurance Co. in Kingston, Ont. Instead, their efforts should go into educating people on setting up their own retirement plans. "[Governments]just need to find ways to provide private incentives for people to start properly saving for their retirement," Mr. Herr said. "It would be much better educating people on what it might take [to retire comfortably] For most Canadians, the RRSP program really works quite well. They just don't take advantage of it."
Empire Life Insurance Co.'s employees are among the minority that enjoy the security of a DB plan that, for most of its existence, has had plenty of money to make its payments to employees. But even the healthy Empire Life plan is currently underfunded, thanks to the stock market plunge of the past year, Mr. Herr said.
Is our pension system facing a crisis in which people working today will not have enough to live on in retirement?
Strongly agree 24%
Somewhat agree 46%
Somewhat disagree 23%
Strongly disagree 3%
Don't know 4%
KATHRYN TAM / THE GLOBE AND MAIL
SOURCE / GANDALF GROUP