How Canada could actually become a world leader in pension innovation [Financial Post]
Keith Ambachtsheer & Ed Waitzer: Canada’s major financial institutions have the scale and skills needed to offer cost-effective plans / Financial Post / Published January 4, 2017
The federal government’s introduction of Bill C-27, legislation to facilitate the offering of target-benefit (TB) pension plans, has reignited the tiresome debate over defined-benefit (DB) versus defined-contribution (DC) and which is the better design for Canadian workplace pension plans. Countries that lead in pension innovation (such as Australia and the Netherlands) have moved on, and are now debating how TB plans should be designed and managed. In this sense, the Bill C-27 initiative should be applauded, as it creates an updated legal platform for necessary innovation in workplace pension-plan design in Canada.
Why are TB pension plans a logical response to the 21st-century workplace pension-plan design question? Because this form of plan integrates the best elements of the traditional DB and DC plans: an explicit target pension benefit; a recognition that long-term compounding of investment returns makes the target benefit affordable; and it offers fair and sustainable risk-pooling and clearly spelled-out property rights and obligations among the employer, employees, pensioners and the pension-management organization.