Morneau Shepell proposes new mandatory provincial government-sponsored pension program would allow Canadians to retire comfortably

Proposed program focuses on middle-income earners, factoring in marital status, income level and number of children

TORONTO, Feb. 24, 2014 /CNW/ - Morneau Shepell (TSX: MSI), the largest administrator of retirement and benefits plans in Canada, suggests a new government-sponsored pension program at the provincial level as a way to improve the retirement system. This is relayed through Morneau Shepell's latest issue of the company's Vision newsletter titled, "Filling the Pension Gap" by Fred Vettese, the Company's Chief Actuary. Morneau Shepell suggests a government-sponsored pension program through net replacement ratios - a standardized percentage of disposable income depending on gross household earnings, allowing for comfortable retirement.

The goal of the suggested pension program is to provide net income replacement ratios that vary by income, broken down by the following:

• Gross household earnings of $25,000 should have a net replacement ratio of 100%
• Gross household earnings of $40,000 should have a net replacement ratio of 90%
• Gross household earnings of $60,000 should have a net replacement ratio of 80%
• Gross household earnings of $85,000 should have a net replacement ratio of 70%

This assumes that members of lower-income households - who often do not have additional funds to contribute to RRSPs, for example - are supplemented in full. Meanwhile members of higher-income households are likely contributing to such additional voluntary savings. This will allow working Canadians at various income levels to maintain a lifestyle they are accustomed to at retirement.

"Currently, the retirement income system seems to have lost a little ground," said Vettese. "As of December 2012, only 21.1 per cent of workers in the private sector are covered by a pension plan, which is the lowest level of participation since the mid-1960s. It's time for a change."

The proposed program focuses on middle-income earners, factoring in marital status, income level and number of children. At both ends of the spectrum, most lower-income Canadians (with gross household earnings of less than $25,000) and higher-income Canadians (with gross household earnings of more than $100,000) benefit from mandatory savings and voluntary savings, respectively. These groups combined make up 32 per cent of all Canadian households, leaving middle-income Canadians to make up the majority at 68 per cent - a group Vettese is narrowing in on for suggested pension reforms.

"By focusing on middle-income Canadian families, a government-sponsored pension program will provide the majority of Canadian workers with a better net replacement ratio," added Vettese.

About Morneau Shepell Inc.
Morneau Shepell is the largest company in Canada offering human resources consulting and outsourcing services. The Company is the leading provider of Employee and Family Assistance Programs, as well as the largest administrator of retirement and benefits plans. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity, and improve their competitive position. Established in 1966, Morneau Shepell serves more than 8,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 3,300 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States, and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.

SOURCE: Morneau Shepell Inc.

Nathan Gibson
Corporate Communications
Morneau Shepell
416-390-2641
[email protected]