Concrete Solutions to Improve Pension Plans and Prevent Poverty for Future Retirees

Seminar on the Future of Pension Plans 

MONTREAL, Feb. 16 /CNW Telbec/ - Organized jointly by the Institut du nouveau monde and the Fonds de solidarité FTQ (the "Fonds"), a seminar on the future of pension plans in Québec was held today at Ex-Centris. Reiterating the demographic and economic challenges facing the province and underscoring the importance of encouraging citizens to save for retirement, the panellists - Michel Arsenault, president of the FTQ, Claude Lamoureux, former president and CEO of the Ontario Teachers' Pension Plan, Pierre Plamondon, Director of Valuation, Statistics and Review, and Chief Actuary at the Régie des rentes du Québec, Michel St-Germain, partner and actuary at Mercer, and Yvon Bolduc, president and CEO of the Fonds de solidarité FTQ - offered concrete suggestions to counteract the poverty of Québec retirees, a situation that threatens to intensify if no action is taken.

Led by Michel Venne, general manager of the Institut du Nouveau Monde, the panel contemplated the situation based on Québec's reality today and prospects for the future, and came up with possible solutions that the governments might find useful.

Worrisome observations
Currently, 30% to 40% of Quebecers do not have sufficient income at retirement and the situation is not getting better. Nearly 50,000 SMEs do not offer pensions, meaning 1 million or 46% of workers are not covered by a group plan. And with the number of contributors to the Québec Pension Plan projected to drop from 3 to 1.5 by 2040, future generations will have to shoulder a heavy burden.

A collective effort is needed
In light of the situation, Michel Arsenault stated that improving income security at retirement is a social issue that everyone must rally around. For instance, legislation should require both workers and businesses to participate in whatever solution is retained. To begin with, he suggests raising the benefits paid out by the Québec Pension Plan (QPP). "By gradually increasing the replacement rate from 25% to 50% and the earnings ceiling from $47,200 to $62,500, future retirees will be able to count on a more adequate level of income replacement, which they can complement with their personal savings. This means that a lower-income worker would see his contribution rise from 4.5% to 7.0%, but at the same time, he would also see his pension double." In the same vein, Mr. Arsenault suggested increasing the Guaranteed Income Supplement (GIS). 

QPP must regain financial equilibrium
According to Mr. Plamondon, the combined replacement rate of public plans (QPP and Old Age Security) is only 40% for the average worker, one of the lowest rates in the industrialized world. A big part is left to private plans (individual or group), which are not as generous, and the returns on personal savings are not high enough. Moreover, the current QPP contribution rate (9.9%, employer and employee contributions combined) is insufficient to achieve equilibrium (it would have to be 11.02%). Steps must therefore be taken for the QPP to regain its financial equilibrium.

More than one solution is needed
For Claude Lamoureux, we need more than one solution and we need to address both public and private plans. It is urgent for the QPP to re-establish equilibrium. Also, the normal retirement age should be raised. Lastly, Mr. Lamoureux suggests that private pension plans should not be self-administered but managed by investment professionals.

The situation differs depending on household income
Mr. St-Germain feels that the answer may have to take into account household income. Higher income earners don't need the government's help. For the middle class, some may be adequately covered by group plans while for others, the immediate priorities are the children and paying down the mortgage. The private sector should be encouraged to offer competitively priced retirement savings product and objective advice. Last but not least, the government should continue to study the possibility of voluntary plans.

Labour-sponsored funds: a profitable solution for savers and the governments
Mr. Bolduc reiterated that public plans alone will not guarantee a comfortable retirement. He believes that complementary solutions can help ensure a brighter future for seniors and prevent poverty during that stage of their lives. He considers labour funds such as the Fonds de solidarité FTQ to be a winning solution for both workers and the governments. "Our savings solution offers security because our owner-shareholders know that the money they're investing is being put aside for retirement. They understand that the funds can only be withdrawn in certain cases, for example, to buy a first home through the Home Buyers' Plan, to go back to school, to start a business, or if their income has fallen drastically. The Fonds RRSP complements the public pension system. The cost of the 30% tax credits is an investment for the governments because they recover their costs fairly fast, within three years on average, after which they even generate a surplus,"1 concluded Mr. Bolduc.

About the Fonds de solidarité FTQ
The Fonds de solidarité FTQ helps drive our economy. With net assets of $7.7 billion as at November 30, 2010, the Fund is a development capital investment fund that channels the savings of Quebecers into investments in all sectors of the economy to help further Québec's economic growth. The Fund is a partner, either directly or through its network members, in 2,052 companies. With its 577,511 owner-shareholders, it has helped, on its own or with other financial partners, to create, maintain and protect 150,133 jobs. For more information, visit

1 "Analysis of the Economics Impact of the Fonds de solidarité FTQ's Investments," SECOR and Regional Data Corporation, June 2010. 



For further information:

Note: The telephone numbers provided below are only for the press and other media representatives.


Josée Lagacé
Senior Advisor, Press Relations and Communications
Fonds de solidarité FTQ
Telephone:  514 850-4835  
Mobile:  514 707-5180

Michel Venne
Director General
Institut du nouveau Monde
Telephone:  514 934-5999, ext. 224
Mobile:  514 237-8032

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