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JUN 2010
‘The Honourable James M. Flaherty
Minister of Finance
Department of Finance Canada
140 O'Connor Street,
Ottawa, ON
K1A0G5
Dear Minister Flaherty,
{In the lead-up to the upcoming Finance Ministers’ meeting in Prince Edward Island, |
wanted to take the opportunity to communicate with you about Ontario's position on.
strengthening Canada's retirement income system. | have appreciated the opportunity
to work together constructively on this important issue, and trust we will continue to
have the opportunity to do so in PEI and in the months beyond,
have become increasingly concerned, especially since the global economic downturn,
that many Canadians are not saving adequately for retirement. Recent research, policy
work, and public consultations have confirmed that although our retirement income
system has many strengths, a significant minority of Canadians in the future are likely to
experience a material decrease in their standard of living upon retirement unless
‘changes are made.
Ontario supports a pan-Canadian approach to the reform that will provide tomorrow's
seniors with better, lower-cost tools to maintain their standard of livingin retirement.
Reforms should build upon the strengths and institutions of the existing retirement
income system, which has significantly reduced poverty among seniors and currently
allows most Canadians to maintain a similar standard of living before and after
retirement.
‘Ontario supports a multi-pronged approach to reform that would strengthen both the
second and third pillars of the system.
First, | believe we can make regulatory changes to hamess Canada's world leading
private-sector expertise, including financial institutions and others, to provide more
cfficient, lower-cost retirement options. Current tax and pension rules say that defined-
contribution pension plans can only be offered where there is an employment
Joonarelationship. This limits the retirement savings options available to the self-employed
land those wno work for small businesses. By changing these laws, we can expand the
range of people who can set up pension plans, and the range of people who can
access them. We could allow large, mult-employer defined contribution pension plans
with low administrative costs to provide portable coverage to more Canadians.
‘Second, | believe we should seriously consider building on the strengths of the CPP
through’a phased-in, moderate increase to retirement and survivor benefits. CPP’s
‘uaranteed benefits are secure, inflation-indexed, and portable. The average CPP
benefit is about $8,000 per year and the maximum is about $1 1,000 per year — lower
than the public employment-related pensions of most other similar countries. Any
improvements would have to be pre-funded, itergenerationally equitable, and
affordable for working people and employers.
Ontario, ke many other jurisdictions, is also modemizing the logisatve framework for
existing defined benefit pension plans and looking at ways to foster innovation in the
future. We would welcome opportunities to work together to strengthen ths important
component of the retirement income system and improve the regulation ofthese plans
across jurisdictions.
Sincerely,