AFL president Gil McGowan says the supplementary plan proposed by the two provinces is flawed because it's not mandatory and — even when added to Canadian Pension Plan and Old Age Security benefits — still wouldn't provide workers sufficient money for retirement.

"It's clear we need some fundamental reforms, but based on the analysis that we've commissioned, it's clear to us the Alberta-B.C. model simply won't do the job," McGowan said Thursday from Dawson City, Yukon where the western premiers are meeting this week.

"If our provincial leaders are serious about introducing new policy that extends pension coverage to a greater percentage of the Alberta population, they can't introduce a system that's not mandatory."
Employers that don't have pension plans now aren't likely to sign up if they still don't have to, he said.

The AFL says only 40 per cent of Canadians have workplace pension plans, but the percentage is much lower in Alberta. It says only 18 per cent of Albertans working in the private sector have pension plans.

The situation has prompted the Alberta government to work with B.C. on a supplementary pension plan for workers with no company pensions and last November the two provinces released a report of a joint expert panel that recommends how a joint plan should operate.

"More and more people ... are starting to realize that if major policy changes aren't initiated, significant numbers of Canadians — probably millions of them — will face the very real prospect of poverty in their old age," said McGowan.

But the AFL insists the Alberta-B.C. plans is "at best an awkward Band-Aid solution."

McGowan says an actuarial consulting firm hired by the AFL found that a person earning $50,000 who retired at age 65 would likely receive only about half the pension income considered necessary for a comfortable retirement. He said the plan could generate as little as 14 per cent of what a person earned before retiring — far below the recommended threshold of 70 per cent.

That's because the plan also doesn't require employers to match employee contributions, he noted.

McGowan said the proposed plan also gets low marks because it is a defined contribution plan rather than a defined benefit plan, meaning that if the stock market collapsed after the worker retired, the benefits would be reduced.

"From our perspective, the current recession has not only diminished the nest eggs most people set aside for retirement, but it shone a light on the patchwork system that we've created in the country," he said.
McGowan said the biggest problem with the supplemental plan is it diverts attention away from the real issue — the fact the Canadian Pension Plan is inadequate and requires major reform to ensure working Canadians can retire with dignity.

The AFL released the report at the western premier's conference to discourage other provinces from signing on to the plan rather than pressing for changes to the national pension plan, McGowan said.
"Our provincial and federal leaders have to start thinking very seriously about making big changes on the pension front as opposed to half measures like the proposed Alberta-B.C. plan," he said.

Alberta Finance officials say the province is not committed to any one plan and it is keeping its options open.

"This is just one of the proposals that they are taking into consideration," said Alberta Finance spokeswoman Jennifer Guzzwell. "We're not exactly sure what the plan will look like and whether it will be mandatory or not."

She said finance ministers from B.C., Alberta, Ontario, Nova Scotia and Manitoba have scheduled a meeting in July to discuss the possibility of a national supplementary pension plan.

Alberta Finance spokesman Bart Johnson added the province has no plans to proceed immediately with the Alberta-B.C. proposal.
"We would prefer to meet with other provinces and see what we can come up with," he said.

McGowan applauded the Alberta and B.C. premiers for considering "long overdue pension reform" and said a national summit on the issue is a great place to begin.

"We're confident that if that kind of meeting is held and all the information is put on the table, Canadians will agree with us that expanding the CPP is the best way forward."

Edmonton Journal, Thurs Jun 18 2009
Byline: Darcy Henton