Could there be a “natural renaissance” of the defined benefit pension plan in the years ahead?
HOOPP is pleased to share a new discussion paper by Stephen Poloz, the ninth Governor of the Bank of Canada. HOOPP is a longtime advocate of improving retirement security for all Canadians, and we are always pleased to discover like-minded thinkers who have their own perspective to contribute to the national dialogue on this issue. In Pensions in the Next Age of Uncertainty, Poloz considers how Canadians will respond to an increasingly uncertain world and how pensions will become even more essential as a result.
According to the 2023 Canadian Retirement Survey, Canadians are worried about the impact of inflation and high interest rates on their ability to save for retirement, with more than half (60%) saying they’ll be forced to push out their target retirement date if inflation continues to climb. In the discussion paper, Poloz takes this a step further, arguing that various factors, including an aging population, technological advancements, rising debt and climate change, are tectonic forces with the potential to interact in unprecedented ways. It's this "unforecastable" future that could leave even more Canadians struggling to save as retirement risks grow.
This high level of uncertainty leads many Canadians to wonder how much money they’ll need to save for retirement, a question compounded by even more questions: how long will they live? What will their future investment returns look like? What will their family home be worth?
Improved access to good workplace pensions, and particularly defined benefit pensions, Poloz explains, can mitigate these challenges by better protecting individuals against longevity risk and market volatility. Further, he notes that while some may think of pensions as a cost, the reality is they more than pay for themselves with the economic growth they generate.
Pensions in the Next Age of Uncertainty makes a compelling companion to our own research, including the newly released 2023 Canadian Employer Pension Survey, which found growing momentum for retirement benefits amongst employers. In fact, the number of employers who plan to introduce or enhance their retirement benefit offerings this year or next increased to 23%, up six per cent since 2022.
We believe these findings provide an intriguing backdrop to Poloz’s detailed look at the future of retirement security and pensions in Canada, in which he offers a unique view and raises new questions. We are pleased to share this discussion paper and encourage you to take a few minutes to read it.
Pensions in the Next Age of Uncertainty