Opinion: With Pension Plans Failing, Retiree's Deserve A Bailout

Reported today at cbc.ca and theglobeandmail.com (among other news networks), the solvency ratio of Canadian pension plans is at an all time low of 69 percent - down 27 percent from just last year. In plain terms, the retired workers of Canada are not receiving their promised due. Quoting Lori McLeod of the Globe’s Report on Business:

“The ratio of the market value of a typical pension plan's assets, compared with its solvency liabilities, plummeted by 27 percentage points in 2008, according to consulting firm Watson Wyatt Worldwide.”

Those most at risk are the former employees of small businesses which may not be able to weather the receding (or reseeding, if you’re and optimist) economy, as pension plan recipients are often left in the lurch when failed companies are forced to try and pay their various debts before collapsing completely.

And with Canadian Finance Minister Jim Flaherty openly airing to the nation Wednesday, January 7th, that small businesses are having a heck of a time getting loans from the increasingly fickle banking houses of Canada, the next year could be even harder on Canadian pensioners.

So obviously the government – which clearly acknowledges both problems in the availability of loans to small businesses, and that more and more Canadian pension plan recipients are not in fact receiving their due – is solving this problem, right?

Well, as far as I can tell, they’ve done four things. One, they have doubled the amount of time for companies that have taken loans to protect their pension plans, called federally sponsored plans, to repay those loans. To once again quote McLeod’s report, “federally-sponsored plans are now being given 10 years, up from five, to repay their shortfalls. Various provinces have similar proposals either approved or on the table.”

So that’s good. Two, Jim Flaherty went on TV and gave a stern talkin’ to the various banks of Canada (the link is available in the ctv.ca article). Three, the government bailed-out a bunch of auto companies in Ontario. Four, the interest rate at the Bank of Canada has been cut to a multi-decade low. Quoting Paul Vieira of Canada.com:

“The Bank of Canada surprised markets Tuesday with a deeper-than-expected 75-basis-point cut to its benchmark-lending rate, to 1.5 per cent or a 50-year low, as it warned that Canada is entering a recession and global economic conditions are deteriorating at a deeper rate than anticipated.”

Well, that last one doesn’t really help pensioners too much (McLeod's article explains why), but it does help small business, so in a roundabout way, it should be included in the ‘good’ section.

But still, the ‘bad’ section seems to be bigger than the ‘good’ section right now if you’re a Canadian pensioner. Today, at edmontonsun.com, Barry Hanson reports that small businesses filing for bankruptcy are at all time highs.

Another article that comes to mind is the one published by thestar.com a few days ago, January 6th 2009, by Rita Trichur and Tony Van Alphen the headline of which read: “As economy staggers and criticism mounts, bankers hold the line on lending practices.”

That’s another a big, ugly point of note in the ‘bad’.

And really, when we get down to it, if we consider the many mounting problems facing the global economy, it’s impossible to come up with a surefire solution that can fix things. The fact that global governments have been lulled into throwing exponential amounts of money to the companies most responsible for the problems speaks volumes.

But if we know we can’t fix everything at once that should tell us we’re going to have to fix things one by one (and that doesn’t mean company by company, or industry by industry).

With various global governments, and certainly the Canadian government, consistently promising to do their best to protect their citizens, particularly those most at risk, the government must assume the costs of compensating the many retired workers of Canada who have spent countless years building the infrastructure of Canada and who, for all the right reasons, deserve their promised due.

And when we think about the costs; geez, it would be but another drop of water in the proverbial puddle of debt we're leaving for the coming generations, and one of the few metaphoric droplets that they'll likely have no qualms about paying off.

In all, it's time that the many nations that are pledging to ensure the well being of “Main Street” step up to the plate and protect those who paved Main Street.

This problem is not isolated to Canada alone. Japan is currently experiencing similar problems with pension solvency. The same is true in Ireland.

And with so many small businesses at risk throughout North America, there is – no doubt – worry in the minds of many retired workers. It’s time for those fears to be quelled; it’s time that the Canadian government lead the way and protect pension plans with federal funds.

Thanks for reading.

GRMM