Expanding workplace pensions should be a post-COVID priority – Toronto Star

While the pandemic continues to have a tremendous impact, a post-COVID time will come, and we as a country will increasingly turn our attention to the rebuild. There will be a lot of conversations about the future of work, inequality, economic stimulus and how we must continue to improve in the areas of equity, diversity and inclusion.

There is another critical issue that must be part of these conversations, indeed an issue that connects to all those mentioned above: retirement security for all Canadians. We are at risk of a retirement crisis, a risk that has increased for the most vulnerable as a result of COVID-19. Addressing this through improved workplace retirement savings plans will benefit individuals, employers and the economy as a whole.

Since the mid-’70s, there has been a significant decline in workplace pension coverage and today more than half of Canadians live paycheque to paycheque. And while the pandemic has seen increased savings for some Canadian households, things have grown worse for those who were already vulnerable.

For many of the 10 million Canadians without access to a workplace pension program, the “plan” might be to work as long as possible while saving as much as possible on their own. But with an unequal (K-shaped) economic recovery that is expected to disproportionally hurt women, lower-income families, young people, racialized Canadians and new Canadians, this approach is becoming even more unsustainable. Individuals left to their own devices will be all the more vulnerable to volatile markets and recessions.

We know that collective retirement savings plans are the most efficient way to save. Research conducted in 2018, by the Healthcare of Ontario Pension Plan (HOOPP), Common Wealth and the National Institute on Ageing, identified five “value drivers” of good retirement plans. With attributes like automatic enrolment, risk pooling and low fees, the best retirement savings plans can reduce the cost of retirement — the savings required to maintain one’s living standard postretirement — by close to $900,000 for a typical Canadian.

And what about the impact on businesses? Research from the Canadian Payroll Association found that one in four Canadians spends almost 40 minutes per day distracted from their work because they are worried about personal finances. The association calculates that financial stress leads to nearly $16 billion a year in lost productivity. In light of this, providing a good workplace retirement plan should be seen as an investment, not an expense.

Good workplace pensions also serve the economy. Pension plans help fuel local economies to the tune of billions of dollars every year. They provide steady income to millions of retirees, making them spenders, not savers, in their communities. And pension plans invest heavily in Canadian companies, real estate and bonds, providing much needed capital to foster economic growth.

Finally, there is the benefit to taxpayers. With programs like Old Age Security and Guaranteed Income Supplement, support for seniors is the largest line item in the federal government’s budget (the Canada Pension Plan is separate from government books). Provincial and municipal governments also incur large costs for health care, housing, and other social services when seniors have inadequate incomes. The risk of significant increases in the costs to taxpayers as the population ages would be reduced if more Canadians had the safety net of a good workplace retirement plan.

We know that Canadians value good workplace pensions and are prepared to do their part to pay for them. A new survey released by HOOPP and Abacus Data found 71 per cent of three in four Canadians would accept less salary in favour of a workplace pension plan. More striking, the willingness to sacrifice some salary for pensions even held amongst those Canadians who said finances were negatively impacted by COVID-19.

Additional research from HOOPP and Common Wealth coming later this year will demonstrate the value to businesses of including workplace retirement plans as part of total compensation. We hope this release will be a timely addition to the conversation about the economic rebuild in the years ahead.

We recognize this is not an overnight fix at a time when many businesses are struggling. But when we, as a country, plan for our post-COVID “new normal,” let’s include in that vision a future where all Canadians have the comfort of knowing their retirement is secure.