David Dodge, Senior Advisor in our Ottawa office discusses
proposed changes to the Pension reform. A report commissioned
by the Government of Ontario, (
Macroeconomic Aspects of Retirement Savings) and prepared
by Bennett Jones advisors David Dodge and Richard Dion was released
to the public on Wednesday, April 23, 2014.
Summary from the report:
The adequacy of future retirement income to support individual
target levels of consumption for Ontarians and Canadians is an
important problem for both individuals and governments. Indeed, on
average, Canadian workers are far from saving enough to support in
retirement a standard of living that they would find satisfactory.
Unless the economy generates higher labour productivity growth than
is currently projected, governments in the future will be under
great pressure to tax an almost static population of workers to
support transfers to a very fast-growing population of elderly.
The big challenge then is how to provide for adequate retirement
income for the future population of elderly people without imposing
an undue burden of taxation on the working population and the
business sector. Such an increased burden could only worsen the
problem of generating enough wealth at the same time as being
inequitable to the younger generations of workers. The solution to
generate more retirement income and potential consumption in the
future is to start now saving and investing more. A higher saving
rate would underpin higher retirement income without increased tax
rates on the working population, directly through larger
accumulated household wealth and indirectly through supporting a
higher investment rate in physical and other forms of capital, and
hence higher productivity, larger investment income and increased
In principle a higher investment rate could be financed by
increased reliance on foreign saving but the experience of the last
several decades tend to suggest that in the long run it is national
savings that finances national investment in the advanced
countries. Moreover, heavy reliance on foreign saving makes
domestic investment more vulnerable to economic and financial
shocks abroad. A higher saving rate by households and governments
is therefore warranted in the longer run to support a higher
investment rate by businesses and governments.
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