CanAge recently co-authored the following Op-Ed, asking some hard questions of the federal government around its unwillingness to protect pensioners.
This is an issue we’ve been actively working on for some time, and is a key recommendation in our policy book.
With all that is going on in the streets of Ottawa, it’s no surprise that the introduction of two private members bills in early February went largely unnoticed. But the 4.3 million Canadians who rely on defined benefit pensions are watching them carefully. The Trudeau government and the public should also take note.
The NDP’s Daniel Blaikie (C-225) and the CPC’s Marilyn Gladu (C-228) both introduced bills to protect defined benefit pensions. While there are differences, both bills support extending super priority to the pension deficit should a company go bankrupt. These bills build on the success of the Bloc’s Marilène Gill’s Bill C-253 in the last parliament, which died on the order paper when the election was called.
Under current Canadian insolvency laws, banks eat first. When the assets of a failed company are divided, as secured creditors, banks get paid first. Pensioners have no rights or status in insolvency and get the short end of the stick. Super priority means that pensioners would move nearer to the front of the line, improving their likelihood of receiving their full pension.
The impact of the proposed legislation is significant. Over 4.3 million Canadians depend on a defined benefit pension for their financial security in retirement. Since 1982, more than 250,000 seniors have suffered pension loss when their company has underfunded their pension and then gone bankrupt. This is what happened with large companies like Sears, and Nortel, as well as smaller ones like White Birch, Cliffs Natural Resources, and Atlantic Co-op, whose pensioners suffered pension losses of 20% or more. Pension loss is for life and has plunged many vulnerable seniors into poverty.
The COVID-19 pandemic has revealed that Canada’s social structures don’t protect seniors, and that includes their financial security. Pension protection is a concrete way to effect real change for seniors at no cost to taxpayers.
The NDP, CPC, BQ, and GPC all support protection for defined benefit pensioners. While this should be a wake-up call for the Liberal government, it continues to oppose pension protection based on outdated thinking and inaccurate information. Rather than look for solutions, the Liberal government looks to maintain the unjust status quo. This makes no sense.
By prioritizing full protection for defined benefit pension in the event of insolvency, corporations and lending markets will be forced to adjust their behaviour. In other words, companies will be compelled by banks and other lenders to fully fund their pensions and hold back executive bonuses and dividends if their pensions are underfunded.
Bankers and corporate leaders will argue this kind of behavioural change is impossible, falling back on outdated excuses that interfering in the private sector will cause businesses to fail and undermine capital markets. A decade ago, people used the same arguments against putting a price on carbon. Today, as we work together to fight the climate crisis, carbon pricing has become a critical tool and businesses have adjusted accordingly.
Pensions are deferred wages, earned while Canadians are working and paid after they retire. Pensioners deserved the full pension that they have earned and their employers committed to. Pensioners should not be acceptable collateral damage in insolvency.
Prime Minister Trudeau and the Liberal government have the opportunity to chart a new course by fixing federal insolvency laws and compelling corporate actors to fully fund their pension commitments and protect the financial security of Canadian seniors.
In a minority Parliament, pension protection legislation provides all parties with the opportunity to work together to improve the financial security of millions of Canadian pensioners. It is time for the Liberal government to lead and protect vulnerable pensioners.
Submitted by:
Michael Powell, President, Canadian Federation of Pensioners
Laura Tamblyn Watts, President and CEO, CanAge
Trish McAuliffe, President, National Pensioners Federation